As one company with ties to former President Donald Trump sees its shares rise today, another is bracing for turbulence ahead as a regulatory probe threatens to derail future growth. The U.S. Securities and Exchange Commission has confirmed that it is investigating Digital World Acquisition (NASDAQ:DWAC), the company taking Trump Media & Technology Group (TMTG) public. This news has DWAC stock down slightly today.
Trump himself is no stranger to regulatory probes and investigations. In fact, AZCentral reports that over the past three decades, he has faced over 4,000 lawsuits, spanning areas of business from trademarks to contract disputes and failure to pay workers. Today brought the announcement, though, that the SEC and the Financial Industry Regulatory Authority (FINRA) have asked DWAC for information on its trading and communications with Trump’s team prior to the merger announcement. According to CNBC, this request was submitted weeks ago.
What should investors be considering as the SEC prepares to investigate the company set to become Trump’s partner? Let’s discuss.
7 Things to Know About the SEC Probe and DWAC Stock
- A DWAC probe was called for two weeks ago by Sen. Elizabeth Warren. She noted that the company “may have committed securities violations by holding private and undisclosed discussions about the merger as early as May 2021.” The SEC’s initial request for information from the companies involved, though, came before her statements.
- Today’s news came via a 8-K form. The blank-check company also used this filing to detail a securities purchase agreement with accredited investors who received preferred stock. Each share of preferred stock has a conversion price of $33.60.
- The filing also stated that neither regulatory agency was indicating that there had been any direct unlawful activity from DWAC or the Trump Media Group.
- It is possible that regulators are exploring if the two companies had any communications regarding a SPAC deal before DWAC made its own trading debut.
- December began with more troubling news for anyone who holds DWAC stock, as Truth Social missed its deadline to launch its beta version.
- News of the regulatory probe hasn’t been good for DWAC stock so far today. As of this writing, shares are down by almost 3% despite market momentum generated by the rise of CF Acquisition (NASDAQ:CFVI), another SPAC with direct ties to Trump.
- When CNBC asked why the regulatory probe was disclosed today, no one representing DWAC or or Trump’s team responded to comment. The Associated Press has reported, though, that DWAC claims to be “cooperating with ‘the preliminary, fact-finding inquiries.’”
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.