NEW YORK — The company that plans to buy Donald Trump’s new social media business has released a federal grand jury investigation that it says could hinder or even prevent the acquisition of the Truth Social app.
Shares of Digital World Acquisition Corp. were down 10% in morning trading Monday after the company revealed it had received subpoenas from a grand jury in New York.
The Justice Department subpoenas follow an ongoing investigation by the Securities and Exchange Commission into whether Digital World broke the rules by engaging in substantial talks about buying Trump’s company, beginning early last year before Digital World entered into force. September, it sold shares to the public for the first time, just weeks before its announcement that it would buy Trump’s company.
Trump’s social media venture was launched in February as he seeks a new digital stage to rally his supporters and fight Big Tech’s limits on speech, a year after he was banned from Twitter, Facebook, and YouTube.
The Trump Media & Technology Group — which operated the Truth Social app and was on the brink of being acquired by Digital World — said it would work with “supervisors that support the SEC’s important mission to protect retail investors.”
The new probe could make it harder for Trump to fund his social media company. The company received promises from dozens of investors last year to pump $1 billion into the company. Still, it won’t get the money until the Digital World acquisition is complete.
Shares in Digital World skyrocketed to more than $100 in October after announcing the deal to buy Trump’s company. The stock was trading at just around $25 in the morning trade.
Digital World is a special acquisition company or SPAC, part of an investment phenomenon that has exploded in popularity over the past two years.
Such “blank check” companies are empty business entities with no operations, offering only a promise to investors that they will buy a company. As such, they can sell shares quickly to the public without the usual regulatory disclosures and delays, but only if they haven’t already set up potential acquisition targets.
Digital World said in a regulatory filing Monday that New York’s Southern District grand jury has subpoenaed every board member. The grand jury and the SEC also seek documents related to the company and others, including a sponsor, ARC Global Investments, and Miami-based venture capital firm Rocket One Capital.
According to the SEC’s disclosure, some documents sought to involve “due diligence” regarding Trump Media and other potential takeover targets, as we andications with Digital World’s underwriter and financial advisor on its first public offering.
Digital World also announced Monday the resignation of one of its board members, Bruce Garelick, a chief strategy officer at Rocket One.