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SPAC Tied to Trump’s Media Business Says It Has a Deal With Regulators


The cash-rich special purpose acquisition company that has a pending deal with former President Donald J. Trump’s media business announced on Monday that it had reached a tentative settlement with securities regulators over an investigation that had stymied the merger.

The Securities and Exchange Commission has been investigating whether preliminary merger discussions between the SPAC, Digital World Acquisition Corporation, and Trump Media & Technology Group, violated federal securities laws. The tentative settlement would require Digital World to pay a penalty and amend some of its previous filings to comply with the law.

In a regulatory filing, Digital World said Trump Media had indicated that it might have reservations about going forward with the merger if it was not completed by Sept. 8. But the SPAC added that it “remains very interested in the transaction” with Trump Media and was hopeful the two companies could iron out their differences.

If Trump Media, the parent company of Truth Social, pulls out of the deal it will be a bitter pill for shareholders of Digital World to swallow. Many of them are retail investors who have been waiting nearly 21 months for the merger to close.

Representatives for Trump Media did not immediately respond to a request for comment.

Digital World said that under the tentative settlement with the S.E.C. it would pay a penalty of $18 million and revise some of its regulatory filings to comply with federal securities laws.

SPACs, which are set up to raise money from investors and then find a company to buy, are not allowed to hold serious merger discussions before they go public. These speculative investment companies have a limited time to complete a merger before they are required to return the cash they raised to investors. Federal authorities had been trying to determine if Digital World’s talks with Trump Media before its initial public offering in September 2021 were substantive enough that they should have been disclosed before the SPAC sold shares to the public.

In its I.P.O., Digital World raised $300 million from investors. In a subsequent private placement, dozens of hedge funds agreed to invest up to $1 billion in the merged company. But the long delay in completing the merger prompted a number of hedge funds to pull out of that financing deal. It is unclear if the private placement is still valid without additional concessions from the companies.

As part of the tentative settlement, which requires approval by S.E.C. commissioners, Digital World said it would enter into a “cease and desist” order with the regulator that found the company had violated securities laws “concerning certain statements, agreements and omissions relating to the timing and discussions the company had with TMTG.”

Digital World’s share price once surged to roughly $97 before crashing down to earth amid all the regulatory delays. The stock, which is largely held by some 400,000 retail investors, closed at just $12 on Monday.

Another investigation that had clouded the merger’s prospects seemed to be resolved last week when federal prosecutors in Manhattan and the S.E.C. filed insider-trading charges against three men who made some $22 million by trading before the merger announcement in October 2021. Two of the men were early investors in Digital World before it went public, and the other was a former director of the SPAC.

No one from Trump Media was implicated in the insider-trading charges.

If Digital World does not complete its deal with Trump Media or any other company by Sept. 8, it will be required to return to current shareholders the $300 million it raised in the I.P.O. Digital World recently asked its shareholders to approve an extension of the deadline, but will need 65 percent of them to go along.

In Monday’s regulatory filing, Digital World said Trump Media was not a party to the tentative settlement and had not yet consented to the deal with the S.E.C. The merger agreement required Trump Media to give its consent to any settlement of an investigation above $100,000.

Digital World also said that in a recent email, Trump Media said “it is currently only bound under the merger agreement through Sept. 8, 2023.” Digital World referred to this as an “interpretative divergence” between it and Trump Media.

For months, executives of Trump Media and some shareholders of Digital World had accused the S.E.C. of using the investigations as an excuse to run out the clock by not approving the merger.

If Trump Media backs out, it is not clear where it would turn to raise financing for its operations. Truth Social, the company’s Twitter-like social media platform, has several million users and has become the main place for Mr. Trump to air his views.



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