Yahoo Finance legal reporter Alexis Keenan details a new investigation into Digital World Acquisition Corp., a SPAC linked to former President Donald J. Trump's proposed social media platform.
ALEXIS CHRISTOFOROUS: Regulators are investigating a deal between Donald Trump's new social media venture and a special purpose acquisition company that would take the former president's company public. Joining us now is Alexis Keenan with all those details. What do we know, Alexis?
ALEXIS CHRISTOFOROUS: Hi, Alexis. So these are actually two investigations that were disclosed today in a regulatory filing from Digital World, that's the SPAC that announced a plan to merge with the Trump-backed social media company, Trump Media Technology Group, back in October of this year. And Digital World started trading publicly on the NASDAQ in September, so just about a month prior to that. And subsequently, as we followed a lot, they were halted multiple times for extremely volatile trading. At one point, reaching a boost of 1,600% from its opening that was around just under $10.
So according to digital world, both FINRA as well as the SEC are asking it for trading information. For FINRA's part, it wants to know about trading that came before the public announcement of the merger. As for the SEC, it wants some additional information. It wants to learn about meetings between Digital World's board about its board, as well as it wants documents and communications between the two companies. Also, it wants identifying information about certain of its investors.
Now all that could be related to claims that Digital World had been flouting the rules that are governing SPACs. These say generally that SPACs cannot go ahead and identify a specified target company before the SPAC's IPO. Now one of the critics of this particular deal has been Senator Elizabeth Warren. She had called on the SEC to investigate. Also a "New York Times" report says that digital world CEO Patrick Orlando had held talks with Trump media as far back as March.
Now, for its part, Digital World has said in its statement, in its regulatory filing that it is cooperating with these inquiries. The company said the inquiry should not be considered an indication that FINRA has determined that any violations of NASDAQ rules or federal securities laws have occurred. Similarly, the company said that the investigation does not also mean that the SEC has concluded that anyone violated the law here.
But still, you know, these two regulators are, perhaps, I think arguably the top two regulators of securities here in the US. And so these are serious inquiries. We have asked for additional comment from both the Trump company as well as Digital World and have not heard back as of yet. Guys.
ALEXIS CHRISTOFOROUS: All right, Alexis Keenan, a developing story for sure. Thanks for bringing us those details.