Trump SPAC faces major jury investigation

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The company, which plans to merge with former President Donald Trump’s social media company, has received subpoenas from a federal grand jury, a setback that could complicate Trump’s plans to bring his company to public markets.

The company, known as Digital World Acquisition Corp., disclosed the subpoenas in a Securities and Exchange Commission document dated June 24, warning that they “may delay, substantially impede or impede the completion” of the agreement. If the combination goes through, Trump’s business could gain access to more than $ 1 billion committed by investors.

The grand jury is at least the third investigative unit to investigate Trump’s Special Purpose Acquisition Agreement (SPAC), after the SEC and the Financial Industry Regulatory Authority opened separate investigations.

Digital World Acquisition did not immediately respond to a request for comment.

Trump SPAC was flooded with cash just after launch, but the stock price has plummeted since the app debuted. It fell 9.6 percent Monday to close at $ 25.15; by comparison, it traded above $ 97 in early March.

According to the submission, the grand jury asked for some of the same documents that were applied for by the SEC. They include information about communication “with or about several individuals” and information about a Miami-based investment company called Rocket One Capital. Also on Monday, the company announced the resignation of a DWAC leader who is described as a leader from Rocket One.

Representatives of Rocket One could not be immediately reached. The company’s website appears to visitors as down for maintenance.

Trump had presented Truth Social, his new social network, as a rival to the Big Tech companies, and unquestionably gave him room to deliver his thoughts and build an alternative to what he sees as “the liberal media consortium.” At the top of the social network, Trump Media & Technology Group launched plans for a subscription streaming service that spans news, entertainment and podcasts.

The launch of the social network earlier this year was marked by great hiccups. The site remained completely inaccessible in the first days of the debut due to technical errors, a 13-hour outage and a waiting list of 300,000 people, which raised questions about viability. The app has since seen their downloads plunge, losing investors, executives and attention.

A SPAC is a shell company set up to take a private company public by merging with it. They are called “blankcheck” companies because investors can buy stocks without knowing which business SPAC will eventually acquire.

While SPACs in their current form have been around since the early 2000s, they have exploded in popularity in recent years, attracting celebrities such as Shaquille O’Neal, Jay-Z and Trump. But they have also invited regulatory scrutiny, the frustration of investors who suffered losses and a rejection from the market.

The agreements had become an alternative way of reaching the public markets. But SPACs have been particularly hard hit in the midst of the recent market downturn, as investors turn away from more risky games and as regulators have proposed new rules to improve disclosure requirements and investor protection.

An index that follows the SPAC performance, the De-SPAC index, has fallen more than 60 per cent for the year, compared with the fall index of the S&P 500 index of about 19 per cent.

DWAC has lost more than half of its value so far this year.

Before Wall Street soured on SPACs, investment cars aroused enormous interest because they could save companies and investors time and money. Stakeholders can bypass the traditional public bidding process and strike quickly, taking advantage of dramatic market fluctuations.

After the initial economic shock at the start of the pandemic, investment frenzy in SPACs took off, attracting hedge funds and retail investors struggling for the next money maker in the midst of the financial chaos created by the public health crisis.