Are former President Donald Trump and his SPAC associates about to face the wrath of President Joe Biden’s regulators? Optimists with confidence in the corridors of power would contend that it is merely a coincidence. Skeptics of how the Swamp operates would argue that this is merely a political tactic aimed at either seeking revenge against the 45th president or preventing Corporate America from proving that the real estate billionaire mogul still possesses value. Whatever the case, the bureaucratic estate is killing two birds with one stone: fighting Wall Street and going to combat with Trump. Is this a war the red-tape league can win?
Trump SPAC’s Yuge Regulatory Probe
Digital World Acquisition Corp. (DWAC), the special purpose acquisition company (SPAC), announced in a public filing on Dec. 6 that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are engaging in “certain preliminary, fact-finding inquiries.”
As part of the probe, FINRA requested stock trading information and communication related to the Oct. 20 merger agreement between DWAC and Trump’s startup Trump Media & Technology Group (TMTG). The SEC wanted details on the identities of investors, calls with Trump, and the minutes pertaining to the meetings of the company’s board of directors.
The blank-check firm, which generates funds from traders to take private businesses public, confirmed that it “is cooperating” with the two regulatory bodies. DWAC added that “the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security.” This comes only a couple of days after DWAC and TMTG announced in a news release that they raised $1 billion in committed capital. Investors are ostensibly ebullient over TMTG’s $3 billion valuation without even having a single product or service manufacturing a single dollar of revenue.
DWAC shares finished the Dec. 6 trading day more than 2% lower. The SPAC had skyrocketed as much as 800% during a two-session span over its ties to Trump and the launch of a new social media app named Truth Social. Trump described the latest venture as a “rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.”
A Political Vendetta?
It was recently reported that Trump met with DWAC’s founder Patrick Orlando in early 2021. If it is confirmed that the two men planned to take the Trump project public without these plans being disclosed to investors, this would be a violation of securities regulations that govern these blank-check entities. The news garnered the interest of Senator Elizabeth Warren (D-MA). The 2020 presidential candidate penned a Nov. 17 letter to SEC Chair Gary Gensler, requesting his attention on the matter. However, it was later confirmed that Gensler and his army of regulators were already on the case.
Some experts are not shocked by the bureaucratic attention that the SPAC has received. “It’s really not a surprise given all the media coverage of the SPAC and the way it traded,” James Angel, a professor at Georgetown University’s McDonough School of Business, told MarketWatch. He added that this is not so much a case of corruption but more about Trump getting to “cash out on his presidency,” much like many of his predecessors, including former President Barack Obama.
While nothing is concrete and confirmed at this point, the likelihood is that the SEC and FINRA will only successfully delay the DWAC-TMTG merger by submitting a series of questions. Considering his label as Teflon Don, could the ex-president, once again, survive the great bombardment of Swamp creatures? Clearly investors understand that Trump maintains immense popularity and tremendous dedication among millions of Americans nationwide, hence the $1 billion fundraising.
A Sign of Things to Come
The regulatory weapons are being fired off by President Joe Biden’s SEC and FINRA. But the armory might not only be directed at Trump-tied targets. In addition to DWAC, several other publicly traded companies have been the target of probes, such as Cassava Sciences, Lucid Group, and Tesla Motors. Plus, the SEC chair has announced plans to update various rules and regulations, including Rule 10b5-1 that allows corporate insiders to submit plans to sell company stock at a specific time and date. Whether this is another Trump witch hunt or not remains to be seen, but evidently regulators are running a full-court press on the finance sector heading into 2022.
~ Read more from Andrew Moran.