The Trump media company watched by regulators; appoints Nunes CEO | national news

NEW YORK (AP) – Regulators are studying the deal that would take Donald Trump’s new social media company to the stock market, a deal that has drawn both legions of fans of the former president and those looking to make a quick profit.

The company in partnership with Trump Media & Technology Group acknowledged the inquiries in a filing it filed with regulators on Monday. He also gave a financial forecast for the company, which wants to compete with Twitter and other platforms that banned Trump after the Jan.6 Capitol riots, as well as Netflix and other streaming video services. He said over the weekend that he had lined up $ 1 billion in investments with a group of anonymous institutional investors.

Separately, Trump Media announced that Rep. Devin Nunes, a Republican from California, will step down from Congress to become the company’s chief executive in January. Nunes, the former chairman of the House Intelligence Committee, has been a staunch supporter of Trump during inquiries into Russian interference in the 2016 election and the president’s impeachment in 2019 by the Democratic-led House.

Regulatory review focuses on Trump’s media firm’s October announcement of its merger with Digital World Acquisition Corp. The company had been launched on the US stock market three weeks earlier for the sole purpose of finding a private company to buy. It is often referred to by its trade symbol “DWAC”.

The DWAC said Monday it was cooperating with “preliminary fact-finding investigations” conducted by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

Early last month, the SEC requested documents relating to DWAC board meetings and communications between DWAC and Trump’s media company, among others. According to DWAC, the SEC’s request stated that “the commission’s investigation does not mean that the SEC has concluded that someone has broken the law or that the SEC has a negative opinion of DWAC or any person. or security “.

The SEC could look into whether DWAC and Trump’s company had conversations about a deal ahead of DWAC’s first public offering of shares, said Jay Ritter, a University of Florida professor and IPO expert.

Under the rules that apply to these blank check companies, known as Special Purpose Acquisition Companies, or SPACs, they are not expected to align acquisition targets before selling their own shares. On November 17, Senator Elizabeth Warren wrote a letter to SEC Chairman Gary Gensler asking if the agency was investigating whether DWAC had broken the law by holding such talks and deceiving potential investors into not telling them. not informing before its IPO.

When asked how worried he would be about the SEC investigation if he was at the front desk, Ritter replied, “It depends on what I knew. It could be harmless or pro forma, or it could be really serious. “

What regulators are probing is unclear. In addition, the regulatory rules on SPAC discussions with targets are gray, only prohibiting “substantive” discussions with possible acquisition targets.

Yet the Trump deal turned out to be unusual in many ways even before a New York Times report from Oct. 29 said that DWAC CEO Patrick Orlando had met with Trump and his officials before going public with the report. DWAC. Blank check companies typically buy businesses with employees, customers, and track records, which is not the case with the Trump deal. Several PSPAC experts also said the three weeks it took DWAC to find and close a deal with TMTG was unusually quick.

DWAC and TMTG did not respond to requests for comment on Monday.

An SEC spokesperson declined to comment beyond saying, “The SEC does not comment on the existence or non-existence of a possible investigation.”

Separately, the Financial Industry Regulatory Authority, or FINRA, requested a review of trading in DWAC shares in late October and early November ahead of the announcement of the October 20 merger deal. This could be an indication of an insider trading research, Ritter said, although it is notoriously difficult to prove.

The announcement of the merger took DWAC shares from $ 9.96 to $ 94.20 in just two days, as Trump supporters and money-seeking investors quickly piled up. The shares have since fallen back to around $ 44.

Such a high price indicates high expectations for Trump’s media business among at least some investors. In its filing with regulators, DWAC also gave some financial forecast for the company, which has yet to launch but wants to build a “non-cancellable” global community.

The presentation included forecasts that the company’s TRUTH social service could have 81 million users by 2026, nearly 7 million more people than those who voted for Trump in the last US presidential election. .

SPACs are generally known to give very optimistic predictions about their future growth in investor presentations.

In five years, TMTG is expected to generate nearly $ 3.7 billion in revenue, according to the filing. That’s more than the annual revenue of retailer Restoration Hardware, VR maker Winnebago Industries and entertainment giant iHeart Media, which owns more than 800 radio stations.

For its TMTG + video service which will deliver “non-awakened” entertainment and news, it says the monthly fee per user could be $ 9 in 2026. Netflix, by comparison, got $ 14.49 in average revenue from its members. Americans and Canadians in the first nine months of this year.

The presentation also lists the names of 30 key employees, including its CTO, but only gives their first names and initials. The company has yet to provide many other details on how it will operate, other than that Trump is its president.

DWAC stock opened with a slight gain on Monday before closing 2.6% lower at $ 43.81.

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