|DWAC down another 12% today. Now sub $40.|
Contributing to the drop?
Elizabeth Warren Calls for SEC to Investigate Trump’s SPAC Deal With DWAC
Massachusetts senator says DWAC might have committed securities violations by not disclosing private discussions about merger earlier in the year
Sen. Elizabeth Warren speaking to the media in Washington, D.C., last month.PHOTO: TOM BRENNER/BLOOMBERG NEWS
Nov. 18, 2021 12:01 pm ET
Sen. Elizabeth Warren is asking the U.S. Securities and Exchange Commission to investigate former President Donald Trump’s deal to take his social-media company public.
In a letter sent to SEC Chairman Gary Gensler dated Wednesday, the Massachusetts Democrat said Digital World Acquisition Corp. DWAC -3.62% —which intends to merge with Mr. Trump’s new company— may have committed securities violations by not disclosing that it held private discussions about the merger as early as May.
In October, Mr. Trump unveiled a digital-media venture—Trump Media & Technology Group—to create a new social network called Truth Social that would go public by merging with DWAC, which is a special-purpose acquisition company, or SPAC. Also called a blank-check company, a SPAC is a shell company that lists on a stock exchange with the sole intent of merging with a private company to take it public.
DWAC and Trump Media & Technology Group didn’t immediately respond to a request for comment Thursday. The SEC declined to comment.
Ms. Warren said in her letter that she is generally concerned about SPACs, saying that they benefit big investors at hedge funds and investment banks over individual investors.
She said Mr. Trump’s deal appears to be “a textbook example of a SPAC misleading shareholders and the public about materially important Information.”
Ms. Warren alleges that the deal violated an SEC provision that bars individuals from making untrue statements or omitting material facts. Ms. Warren, citing media reports, said in her letter that DWAC was holding talks with Mr. Trump’s company earlier this year but said in SEC filings that it didn’t have substantive discussions with any companies to combine with.
“DWAC and Trump Media and Technology Group appear to have brazenly flouted theseRules,” Ms. Warren wrote in her letter.
DWAC shares fell 4% on Thursday. The stock surged last month amid a wave of individual-investor interest because of the company’s link to Mr. Trump. The company has promoted itself as having a large market opportunity in presenting an alternative to what it views as the liberal-minded media establishment.
The Blank-Check Boom Poses Pitfalls for Investors
Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
DWAC raised money from investors in early September and announced its deal in late October, one of the fastest such turnarounds among the hundreds of SPAC deals announced in the past few years. Its backers and other insiders could make several hundred million dollars thanks to unique incentives granted to SPAC creators.
Ms. Warren and other lawmakers have previously questioned how SPAC executives are compensated and whether they disproportionately benefit at the expense of individual investors.