Securities regulators have launched an inquiry into a proposed merger between a nascent social media firm promoted by former President Donald J. Trump and a so-called blank-check company that garnered over $300 million in an IPO in September.

The Securities and Exchange Commission and the Financial Industry Regulatory Authority are investigating Trump Media Technology Group, according to a regulatory filing by Digital World Acquisition Corporation, a special purpose acquisition company that plans to merge with Trump Media Technology Group.

US regulators probe Trump's media venture

Both regulators are seeking for information on Digital World's stock trading. The Securities and Exchange Commission is also investigating "documents and conversations" between Digital World and Trump Media.

"The investigation does not indicate that the SEC has found that someone broke the law or that the SEC has a bad view of DWAC or any person, event, or security," Digital World said, adding that it was working with the requests for information.

The probe, which Digital World claims began in early November, comes after The New York Times revealed that Patrick Orlando, the company's CEO, had contact with Trump Media executives as early as March about a transaction.

Digital World was founded as a special purpose acquisition business, or a corporation that obtains money through an initial public offering (IPO) and then looks for a company to buy. When SPACs become public, they are not allowed to participate in merger discussions without informing investors.

Per USA Today, the regulatory concerns center on Trump's media company's statement in October that it would merge with Digital World Acquisition Corp. That business had debuted three weeks prior on the New York Stock Exchange with the sole objective of gaining a privately held corporation. The trade symbol "DWAC" is frequently used to refer to it.

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DWAC stated on Monday that it is collaborating with the Securities and Exchange Commission and the Financial Industry Regulatory Authority's "preliminary, fact-finding inquiries." The SEC demanded information from DWAC's board of directors, trading practices, and interactions between DWAC and Trump's media venture, among other things, early last month.

According to Jay Ritter, an IPO specialist at the University of Florida, the SEC might be looking into whether DWAC and Trump's firm had any discussions about a merger before DWAC's own initial public offering of stock. DWAC has around $293 million in capital from its first public offering.

These blank-check businesses, also known as special-purpose acquisition companies, or SPACs, aren't permitted to line up acquisition targets before selling their own shares, according to the regulations. Senator Elizabeth Warren issued a letter to Gary Gensler, the chairman of the Securities and Exchange Commission, on November 17 asking whether the agency is looking into whether DWAC broke the law by conducting such meetings and deceiving potential investors by neglecting to inform them before its IPO.

Senator Elizabeth Warren, a former Democratic presidential candidate, wrote to SEC Chairman Gary Gensler, requesting that the commission open an investigation into the Trump SPAC. Warren requested that the SEC look into any security violations by holding private and undisclosed discussions about the merger as early as May 2021, as per Newsweek via MSN.

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