For nearly a year, regulators have been examining whether a proposed merger involving the social media company backed by former President Donald J. Trump broke securities laws, The New York Times reports.
To save the deal ahead of a December deadline, lawyers for Digital World Acquisition, which plans to merge with Trump Media & Technology Group, recently met with regulators to plead their case.
Digital World’s case could hinge on the meaning of the word “substantive.”
Under SEC rules, SPACs are not allowed to hold discussions with potential merger partners before they go public, and if they do, the talks must be disclosed. Failure to do so could constitute securities fraud.
When it filed its papers to go public in September 2021, Digital World said there had been no “substantive discussions, directly or indirectly” with any potential merger targets — a standard disclosure in SPAC deals. A month later, it merged with Trump Media.
The Times reported in October 2021 that Digital World might have violated securities laws by discussing a possible merger with Trump Media before going public. In November, regulators began investigating whether Digital World had misled investors by stating it had not engaged in merger discussions before the IPO. Read more.
