A proposed merger between former President Donald Trump’s social media business and a special purpose acquisition company could fail as the company's board received subpoenas from a federal grand jury.
All members of the board of Digital World Acquisition Corp. (DWAC) received a subpoenas from the Southern District of New York. The company said in a U.S. Securities and Exchange Commission filing on June 27 that they learned about the grand jury probe on June 16.
SPACs give companies access to more capital from the public markets and the proposed merger could have provided billions of dollars in cashflow.
Shares of Digital World Acquisition fell by over 9% Monday on the news after the company lost over 52.2% during the past six months. The broader market, such as the S&P 500 fell by 18.2% during the same period. After the deal with Trump's company was announced in October, shares rose to $90.
The company is being investigated by the SEC already. The grand jury is seeking documents that the SEC also sought in its civil investigation, according to DWAC.
DWAC said it received a subpoena itself on June 24 requesting similar information.
The federal investigation is halting the efforts of Trump Media & Technology Group Corp (TMTG), which launched Truth Social, a social media platform, from going public.
Trump launched the company after he was banned from Twitter because of his tweets on Jan. 6, 2021 claiming the false narrative that the presidential election was stolen.
Last October, Trump Media & Technology announced a merger with Digital World with expectations that the deal could close during the second half of this year.
Digital World has seven directors on its board, including CEO Patrick Orlando and CFO Luis Orleans-Braganza as of April 13.
In June, the company said the SEC and the Financial Industry Regulatory Authority, an industry self-regulatory organization, have both been seeking details about the deal with TMTG since 2021. FINRA's probe asked for the same documents as the SEC.
The grand jury also wants information about individuals, communications and information related to Rocket One Capital, a Miami-based venture capital company.
Digital World said Bruce Garelick, chief strategy officer of Rocket One Capital, resigned from the board. He said the reason for the resignation “was not the result of any disagreement with Digital World’s operations, policies or practices,” according to the company's filing. He did not respond to a request for comment, according to CNBC.
Michael Shvartsman, founder and CEO of Rocket One Capital, did not respond to a request for comment, according to Reuters. The company's website remained blank, stating, "Maintenance mode is on. Site will be available soon."
