US regulatory authorities investigate Trump's social media firm merger deal

Special purpose acquisition company Digital World Acquisition Corp (DWAC) has come under scrutiny from US regulators for a deal that would turn Trump Media and Technology Group (TMTG) into a publicly listed company.

TMTG is the social media company of former US president Donald Trump (pictured). According to a filing on US markets watchdog, the Securities and Exchange Commission (SEC), DWAC said it has received "certain preliminary, fact-finding inquiries from regulatory authorities", with which it is cooperating.

In October, DWAC entered into a definitive merger agreement with Trump's social media company that will allow it to become publicly listed. The transaction values TMTG at an initial enterprise value of US$875 million, with a potential additional earnout of US$825 million in additional shares for a cumulative valuation of up to US$1.7 billion depending on the performance of the stock price post-business combination.

Specifically, DWAC said in the filing that the Financial Industry Regulation Authority requested for information in late October and in early November 2021, surrounding events that preceded the public announcement of the merger agreement on 20 October. In early November, SEC also sought information from DWAC about its board meetings; policies and procedures relating to trading; the identification of banking, telephone, and email addresses; the identities of certain investors; and certain documents and communications between DWAC and Trump's company.

The SEC, however, said "the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security". Both companies said in a joint statement just last week that a diverse group of institutional investors had committed to contributing US$1 billion to the transaction. 

In November, TMTG began the Beta launch of its social network, TRUTH Social, with a nationwide rollout expected in the first quarter of 2022.

Trump said previously that TRUTH Social and TMTG were created "to stand up to the tyranny of big tech". He added that TMTG was founded "with a mission to give a voice to all" and that he is excited to begin sharing his thoughts on TRUTH Social and to "fight back against big tech".

Meanwhile, DWAC's chairman and CEO, Patrick Orlando, said it believes that TMTG is "one of the most promising business combination partners" to fulfill its purpose of creating public shareholder value. "Given the total addressable market and President Trump’s large following, we believe the TMTG opportunity has the potential to create significant shareholder value," he added.

TMTG also intends to launch a subscription video on-demand service, TMTG+, which will feature "non-woke" entertainment programming, news, and podcasts, among others.

Trump previously faced scrutiny from big tech companies such as Twitter and Facebook during his time as president. Both companies blocked Trump's accounts for policy violations earlier this year after violent protests erupted in Washington D.C., which saw a mob of Trump supporters storming Capitol Hill to challenge then-president-elect Joe Biden’s recent election win.

Last May, Trump also signed an executive order preventing online censorship, targeted at social media companies such as Twitter, Facebook, Instagram, and YouTube. According to media reports then, the executive order allows regulators to pursue legal actions towards these companies for the content posted on the platform. This came after Twitter fact-checked some of his tweets.

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