A subpoena is sent to the company that bought Trump’s Truth Social app.
The company that wants to buy Donald Trump’s new social media business has said that an investigation by a federal grand jury could make it harder or even impossible for them to buy the Truth Social app.
Monday at noon, shares of Digital World Acquisition Corp. fell by 10% after the company said it had received subpoenas from a grand jury in New York.
The Justice Department subpoenas came after the Securities and Exchange Commission started looking into whether Digital World broke any rules by having serious talks about buying Trump’s company as early as January of last year, before Digital World sold its first shares to the public in September.
After being banned from Twitter, Facebook, and YouTube a year ago, Trump started his social media business in February. He wants a new digital stage to rally his supporters and fight Big Tech’s speech limits.
The Trump Media & Technology Group, which runs the Truth Social app and was in the process of being bought by Digital World, said in a statement that it will help with “oversight that supports the SEC’s important mission of protecting retail investors.”
The new investigation could make it harder for Trump to get money for his social media business. Last year, dozens of investors said they would put $1 billion into the company. However, the company can’t get the money until the Digital World acquisition is done.
After the deal to buy Trump’s company was made public in October, Digital World’s stock shot up to more than $100. On Monday morning, the price of the stock was right around $25.
Digital World is a special-purpose acquisition company, or SPAC, which is part of an investment trend that has exploded in popularity over the past two years.
These “blank-check” companies are empty corporations that don’t do anything. The only thing they promise investors is that they will buy a business in the future. As a result, they can quickly sell stock to the public without the usual disclosures and delays from regulators, but only if they haven’t already found possible companies to buy.
In a regulatory filing on Monday, Digital World said that the grand jury in the Southern District of New York had sent subpoenas to each member of its board of directors. The grand jury and the SEC are also looking for a number of documents related to the company and others, like ARC Global Investments, which is a sponsor, and Rocket One Capital, a venture capital firm in Miami.
According to the SEC’s disclosure, some of the documents being asked for have to do with “due diligence” on Trump Media and other possible acquisition targets, as well as communications with Digital World’s underwriter and financial adviser during its initial public offering.
On Monday, Digital World also said that Bruce Garelick, who was the chief strategy officer at Rocket One, was leaving the board.