The public listing of former President Donald J. Trump’s social media company took a further hit Monday when the cash-rich shell company merged with Mr. Trump’s company. disclosed in a regulatory filing that a federal grand jury in New York recently issued subpoenas on the company and its directors.
The grand jury subpoenas were issued last week, according to a filing by Digital World Acquisition, a special purpose acquisition company, or SPAC, which announced a merger with Trump Media & Technology Group in October. Following the merger, Trump Media would take over the listing and trading of Digital World as a public company.
The Digital World disclosure is the first sign that federal prosecutors in Manhattan have added to the scrutiny of the Digital World-Trump Media merger, which has been under investigation by financial regulators for months. The investigation threatens to further delay the completion of the merger, which would provide Mr. Trump’s company and his social media platform, Truth Social, with capital of up to $1.3 billion, as well as going public.
The Securities and Exchange Commission and the Financial Industry Regulatory Authority open investigations weeks after the announcement of the merger. Digital World’s filing on Monday said the grand jury subpoenas sought information similar to what the SEC had already requested.
The federal grand jury also sought “information about Rocket One Capital.” The filing did not reveal what information the grand jury wanted about Rocket One, a Miami venture capital firm.
in a separate file, Digital World revealed that Bruce Garelick had stepped down as director. Mister. Garelick is listed in Digital World presentations as director of strategy on Rocket One.
Mister. Garelick did not immediately respond to a request for comment. The presentation did not give a reason for his resignation.
the SEC investigation has focused on whether and why there were serious discussions between Digital World leadership and Trump Media before SPAC went public in September. those conversations were not disclosed in statutory submissions. SPACs, which raise money to go public in hopes of finding a merger candidate, are not supposed to have an acquisition goal in mind when they raise money from investors.
Regulators also requested information about unusual trading activity in Digital World securities prior to the merger announcement. There there was a great increase in trade of Digital World warrants, a security that gives the holder the right to purchase shares at a later date and at a specified price, prior to the announcement of the merger.
Trump Media issued a statement in response to Digital World’s disclosure saying it was “focused on reclaiming the right of the American people to free expression.” The company added: “We encourage, and will cooperate with, oversight that supports the SEC’s important mission of protecting retail investors.”
Grand jury subpoenas are usually issued in connection with a possible criminal investigation. Counsel to the US attorney in Manhattan, Damian Williams, declined to comment on the grand jury subpoenas issued to Digital World.
Trump Media’s Truth Social, a Twitter-like social media clone that Mr. Trump has begun posting messages on and, after a slow start, has begun to gather supporters, especially among conservatives and other supporters of the former president. Mister. trump was banned from twitter in January 2021 after repeatedly posting messages claiming the 2020 presidential election had been stolen and for failing to promptly denounce the January 2021 presidential election. 6 attack on the Capitol building.
Elon Musk, the billionaire businessman who has made an offer to buy Twitter, has said it would allow Mr. Trump to return to the much larger social media platform if he completed his deal. Mister. Trump has said that he has no intention of returning to Twitter.
But a license agreement between Trump Media and the former president allows him to publish messages from a political nature on Twitter or other social media platforms.
In regulatory filings, Digital World has said that Truth Social “exists to provide its users with a true free speech platform and prevent cancellation by Big Tech.”
Mister. Trump is the president of Trump Media, a position he is expected to retain if the merger is completed. Devin Nunes, a former Republican congressman from California, is the CEO of Trump Media, which recently moved its corporate office to Sarasota, Florida.
It does not appear that anyone associated with Trump Media has received any subpoenas, according to Digital World’s files.
It is not clear how Rocket One Capital was involved in the investigation. The venture capital firm is led by Michael Shvartsman, who did not respond to requests for comment. Shortly after Digital World revealed the grand jury subpoena, Rocket One removed much of its public website.
The parallel investigation by federal prosecutors and securities regulators comes as the clock ticks down on September 1. 8 deadline to complete the merger. The proposed merger agreement allows the deal deadline to be extended to March 8, 2023.
But the shareholders of SPACs have become increasingly reluctant to extend the deadlines for completing the mergers as the share prices of many SPACs have plummeted in recent months.
Shares of Digital World, which closed last week at $27.82, fell more than 10 percent in early trading Monday. The stock is down more than 70 percent from its March high but remains well above its $10 trading price.
If the merger is not completed, Digital World will have to return to shareholders the nearly $300 million raised in the initial public offering. The $1 billion that dozens of hedge funds have said they would invest in a full deal would be wiped out.
The poor performance of the SPACs has led to the cancellation of several mergers planned by agreement of the parties. The proposed agreement between Trump Media and Digital World allows the parties to mutually agree to terminate the agreement.
Earlier this year, Trump Media raised about $15 million in funding from a group of anonymous investors.
kitty bennett contributed research.
