Warren calls for investigation into planned Trump SPAC deal

Sen. Elizabeth Warren (D-Mass.) on Wednesday called on the Securities and Exchange Commission (SEC) to open an investigation into the planned deal between former President Trump’s new media and technology company and a Special Purpose Acquisition Company, or SPAC.

In a letter to SEC Chairman Gary Gensler, Warren said Trump’s 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 also revealing that his Trump Media & Technology Group had entered into a merger agreement with Digital World Acquisition Corp (DWAC), a SPAC. The blank-check company was established in December.

Trading in the SPAC was temporarily halted a number of times after Trump announced the merger. The stock skyrocketed 130 percent at one point.

Warren noted that according to 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 who get on board at the time of an initial public offering (IPO).

“But DWAC and Trump Media and Technology Group appear to have brazenly flouted these rules,” Warren wrote. She cited SEC filings from between May 25 and Sept. 8, where the DWAC had said it did not pick any “specific business combination target” or initiate “any substantive discussions, directly or indirectly, with any business combination target.”

According to news reports cited by Warren, however, the sponsor of the SPAC, Patrick Orlando, was having conversations about an agreement with Trump as early as March 2021, well before the SPAC made its first filing in May 2021 and launching its IPO in September 2021.

“The reports about 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 DWAC’s failure to disclose early conversations “had the result of enriching big investors while trapping retail investors in a stock bubble.” She noted that after DWAC said it was merging with Trump’s company at least four institutional investors sold their unrestricted shares.

The Massachusetts Democrat also questioned the lack of a business model of Trump’s company, contending that it “raises questions about the extent to which DWAC may be profiteering off the SPAC model and its inherent disclosure failures.”

She said the media company’s corporate overview does not include any officers, employers or operations, but instead relies on “the brand of former President Trump and aspirational statements about the company’s ability to compete with existing social media giants, the traditional news media, and streaming services, including Netflix and Disney Plus.”

Warren said that if the reports she laid out are correct, “the agency has a responsibility to act.”

She requested that Gensler answer a series of questions, including if the SEC’s Division of Corporation Finance is looking into claims that DWAC did not disclose conversations with Trump’s company, if the SPAC’s failure to disclose conversations with Trump’s company is a material omission, and what the obligations of Trump’s company are.

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