Warren calls for investigation into planned SPAC deal with Trump

Its. Elizabeth warrenElizabeth WarrenBill Honoring 13 Service Members Killed in Afghanistan Addresses Biden’s Desk Equilibrium / Sustainability – Presented by Southern Company – COVID-19 Kills Snow Leopards at US Zoo Inflation Increases Focus on Biden Fed’s choice MORE (D-Mass.) On Wednesday he asked the Securities and Exchange Commission (SEC) to open an investigation into the planned settlement between the former President TrumpDonald Trump On The Money – Biden Warns Oil Industry Memo: Gosar Censored, But Toxic Culture Rises Cleveland MLB Team Officially Renames Guardians Friday MOREtechnology and new media company and a special purpose acquisition company, or SPAC.

in a letter to the president of the SEC Gary GenslerGary GenslerBiden Administration, Stakeholders to Host Cross-Agency Event on Economic Equity Are Global ESG Reporting Standards Possible? How Washington’s New Regulations Could Lead to a Blockchain Brain Drain MOREWarren said the Trump company “may have committed serious securities violations by holding private and undisclosed discussions about the merger as early as May 2021,” which was before the deal was announced.

Trump announced last month that he was launching a new social media network, dubbed “Truth Social,” while revealing that his Trump Media & Technology Group had signed a merger agreement with Digital World Acquisition Corp (DWAC), a SPAC. The blank check company was established in December.

Trading on the SPAC was temporarily halted several times after Trump announced the merger. The stock soared 130 percent at one point.

Warren noted that under the Securities Act of 1933, SPACs must disclose any form of direct or indirect contact with potential target companies in an effort to protect investors joining at the time of an initial public offering (IPO).

“But DWAC and Trump Media and Technology Group appear to have blatantly circumvented these rules,” Warren wrote. He cited the SEC filings between May 25 and September 8, where the DWAC had said that it did not choose any “specific business combination objective” or initiate “substantive discussions, directly or indirectly, with any objective of combining business. business”.

However, according to news reports cited by Warren, SPAC sponsor Patrick Orlando was having deal talks with Trump as early as March 2021, long before the SPAC made its first filing in May 2021 and launched its initial public offering in September. 2021.

“The reports on DWAC and Trump Media and Technology Group appear to be a textbook example of a SPAC misleading shareholders and the public about materially important information,” Warren wrote in the letter.

Warren said that DWAC’s failure to disclose early talks “had the result of enriching big investors while trapping retail investors in a stock bubble.” He noted that after DWAC said it would merge with Trump’s company, at least four institutional investors sold their shares without restrictions.

The Massachusetts Democrat also questioned the lack of a business model for Trump’s company, stating that it “raises questions about the extent to which DWAC may be capitalizing on the SPAC model and its inherent disclosure flaws.”

He said the media company’s corporate overview does not include any officials, employers, or operations, but is based on “former President Trump’s brand and aspirational statements about the company’s ability to compete with the giants of existing social networks, traditional media and broadcasting. ” services, including Netflix and Disney Plus. “

Warren said that if the reports he submitted are correct, “the agency has a responsibility to act.”

She requested that Gensler answer a number of questions, including whether the SEC’s Division of Corporate Finance is investigating claims that DWAC did not disclose conversations with Trump’s company, if the fact that SPAC has not disclosed conversations with the Trump company. Trump is a material omission and what is the problem. Trump’s company obligations are.

The Hill reached out to the SEC and Trump for comment.


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