The company planning to buy Donald Trump’s new social media business has disclosed a federal grand jury investigation that it says could impede or even prevent its acquisition of the Truth Social app.
Digital World Acquisition Corp.’s shares fell 10% on Monday morning as it revealed that the grand jury of New York had subpoenaed them.
The Justice Department subpoenas follow an ongoing probe by the Securities and Exchange Commission into whether Digital World broke rules by having substantial talks about buying Trump’s company starting early last year before Digital World sold stock to the public for the first time in September, just weeks before its announcement that it would be buying Trump’s company.
Learn More What to Know About Digital World, the Company Funding Trump’s New Social Media Platform ‘TRUTH Social’
Trump’s social media venture launched in February as he seeks a new digital stage to rally his supporters and fight Big Tech limits on speech, a year after he was banned from Twitter, Facebook and YouTube.
The Trump Media & Technology Group — which operates the Truth Social app and was in the process of being acquired by Digital World — said in a statement that it will cooperate with “oversight that supports the SEC’s important mission of protecting retail investors.”
Trump could find it harder to fund his social media business with the new probe. The company last year got promises from dozens of investors to pump $1 billion into the company, but it can’t get the cash until the Digital World acquisition is completed.
Stock in Digital World rocketed to more than $100 in October after its deal to buy Trump’s company was announced. In morning trading on Monday, the stock was only $25.
Digital World, a company that acquires special-purpose companies, is part of an investment phenomenon that has seen a huge rise in popularity the last two years.
Such “blank-check” companies are empty corporate entities with no operations, only offering investors the promise they will buy a business in the future. As such they are allowed to sell stock to the public quickly without the usual regulatory disclosures and delays, but only if they haven’t already lined up possible acquisition targets.
Learn More What’s Allowed on Trump’s New ‘TRUTH’ Social Media Platform—And What Isn’t
Digital World announced Monday, in a regulatory file that every member of the board has been subpoenaed. This was by the Southern District New York grand jury. The grand jury as well as the SEC want a variety of documents related to Digital World and other companies, including ARC Global Investments and Rocket One Capital, a Miami-based venture capital company.
Some of the sought documents involve “due diligence” regarding Trump Media and other potential acquisition targets, as well as communications with Digital World’s underwriter and financial adviser in its initial public offering, according to the SEC disclosure.
Digital World on Monday also announced that Bruce Garelick, chief strategy officer at Rocket One, was resigning from the board.
Read More From Time