Donald Trump’s effort to launch a MAGA-centric tech firm to rival the likes of Google and Facebook landed a new CEO on Monday. It also disclosed that it’s under investigation by the feds.
Trump Media and Technology Group (TMTG) will be helmed by Representative Devin Nunes, a Trump sycophant whose previous experience in the tech world mostly consists of an unsuccessful lawsuit against Twitter over a parody account titled “Devin Nunes’s Cow.” Nunes will be resigning from Congress to become CEO of the company, which is currently merging with a special purpose acquisition company (SPAC) named Digital World Acquisition Corp (DWAC), starting in January 2022. It’s that deal which the feds are apparently frowning on.
As reported by the Washington Post, DWAC disclosed in a Securities & Exchange Commission filing that it had received separate inquiries from the Financial Industry Regulatory Authority (FINRA) and the SEC. First, DWAC admitted FINRA had sent them “certain preliminary, fact-finding inquiries” in late October and early November, in both cases related to trading of the SPAC’s stock. The SEC separately sent DWAC inquiries asking for information on meetings by the SPAC’s board of directors, as well as information on investors and company communications.
As the Post wrote, this isn’t in and of itself necessarily a conclusion that DWAC or anyone associated with it has broken the law. But receiving inquiries from two separate regulators is never great news, and there’s plenty to indicate something fishy might be going on here.
SPACs are basically shell companies set up to merge with a private firm in order to fast-track the merged entity onto public markets; they are also a vehicle for the company seeking to go public to lure more capital from investors. In this case, the company seeking to get on the public stock exchanges as fast as possible is TMTG, and its partner has already been wreaking stock market havoc. After the TMTG-DWAC merger was announced on Oct. 20, DWAC stock surged by more than 800%. As the companies offered only extremely thin documentation for investors on little things like what TMTG’s business model would be, the skyrocketing share price seemed to be based almost entirely on buzz tied to the ex-president’s name. On Dec. 4, Bloomberg reported that DWAC/TMTG claimed to have recently signed a deal to clear more than $US1 (A$1.40) billion from unidentified investors.
According to TMTG promotional material, the company intends to create “a media powerhouse to rival the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, who have used their unilateral power to silence opposing voices in America.”
The rest of the doc is mostly a retread of conservative culture war gripes, like Trump’s Twitter ban or the need for “non-woke” entertainment. Its only solid proposal is Truth Social, a sort of Twitter/Facebook clone which might already be in violation of the licence terms of its open-source codebase. Beyond that, it mentions TMTG+, an “on-demand streaming service” for which there is little evidence any work has been done yet, and a “Long-Term Opportunity TMTG Tech Stack” that will somehow pick off Amazon Web Services, Azure, Google Cloud, and Stripe. No corporate officers, employees, or operations are mentioned.
What FINRA and the SEC might be looking for is unclear. However, DWAC’s momentary surge in stock price to as high as $US175 (A$248) per share has since seen a massive collapse to around $US44 (A$62) per share. The Post noted that in a letter to the SEC on Nov. 17, Sen. Elizabeth Warren expressed her concern that the company had no apparent business model and could be a pretext for the parties involved to bilk individual investors. The New York Times has also reported that DWAC chief Patrick Orlando had discussions with Trump over the TMTG deal all the way back in March 2021, long before September, when DWAC was listed on the stock market. That may place them in violation of financial regulations requiring SPACs have no specific target in mind at the time they raise money; those rules are (at least in theory) intended to prevent someone from, say, using an SPAC as a backdoor vehicle to barrel a firm to the market without all those pesky investor disclosures.
“Nobody is above the law — and there may have been serious violations of securities laws during the proposed merger of Digital World Acquisition Corp & Trump’s media company,” Warren told CNN.
Nunes told CNBC in a statement he was “humbled and honoured” to head up Trump’s new venture, which follows the lead of several other MAGA-themed trainwrecks. After getting banned from virtually every major social network and leaving office, Trump launched a blog titled “From the Desk of Donald J. Trump.” He shuttered it a few weeks later after getting a humiliatingly low rate of visitors. After that, his longtime aide Jason Miller left the president’s service to helm a social media site called GETTR, a disastrously built website that itself appears to have been originally built as a vanity project for a fugitive Chinese billionaire. Miller very much appears to have been under the impression Trump would join GETTR, supercharging its user growth, but the ex-president never did. The site has since been tanking, and Trump’s team appeared to twist the knife, inserting a graphic where GETTR’s logo appeared to be superimposed over a Chinese flag into the TMTG promotional packet.
DWAC and TMTG didn’t immediately respond to a request for comment on this story, and we’ll update this post if we hear back.