Former President Donald Trump’s social media startup is in Sen. Elizabeth Warren’s crosshairs.
The Massachusetts Democrat urged the U.S. Securities and Exchange Commission to investigate the Trump Media & Technology Group’s merger agreement with Digital World Acquisition Corp., a special purpose acquisition company or SPAC.
Ms. Warren is no fan of SPACs, having begun her own investigation in September into SPACs’ potentially exploitative actions, and she wrote to SEC chair Gary Gensler last month requesting that he investigate the Trump Media & Technology Group merger agreement with a SPAC. In the letter, she raised concerns that Mr. Trump’s group “may have committed securities violations by holding private and undisclosed discussions about the merger” while excluding that info from public documentation.
“I have frequently spoken about the need to hold public officials accountable for lawbreaking and ethics violations. This includes the former president, who is not above the law,” Ms. Warren wrote in the letter. “The reports that DWAC may have violated securities laws and harmed investors during its acquisition of Trump Media and Technology Group are deeply troubling and provide an opportunity for the SEC to follow through on its commitment to investigate wrongdoing and fraud in the SPAC space.”
She asked the SEC to inform her by Nov. 29 about whether the agency was investigating Mr. Trump’s group. The SEC declined to comment when asked on Friday about Ms. Warren’s letter.
Ms. Warren’s office did not respond to a request for comment by The Washington Times.
Some conservatives fear Ms. Warren’s actions are an attempt to kill conservative alternatives to big tech companies in the crib before they have a chance to compete.
“The last thing we need to do is have Trump-deranged politicians like Elizabeth Warren send federal regulators on political fishing expeditions that would have the effect of crushing start-up competitors to the trillion-dollar big tech monopolists — Google, Amazon, Facebook and Apple — that are shuttering small businesses and canceling conservatives,” said Mike Davis, founder of the conservative Internet Accountability Project.
SPACs, also referred to as blank check companies, provide advantages to private companies seeking to go public and raise funding in a hurry. Companies engage with SPACs because it may allow them to go public more efficiently and investors form SPACs to move swiftly to make acquisitions and fuel innovation in areas where the investors have particular expertise.
For example, the video platform Rumble announced earlier this week it was combining with a SPAC sponsored by financial services firm Cantor Fitzgerald in a transaction that Rumble said it expected would provide $400 million in proceeds, with $100 million fully committed.
Rumble is a Canada-based company looking to compete with Google-owned YouTube that has plans to open offices in Florida next year.
Rumble founder and CEO Chris Pavlovski said that raising the $400 million by going public with CF Acquisition Corp. VI would be much easier than amassing funding from private investors.
“The purpose of this combination with CFVI is to make us stronger, get us capitalized, and really have significantly more independence now to build something that’s going to be very meaningful in the market,” Mr. Pavlovski said.
Earlier this year, Rumble touted a large undisclosed investment from a group including billionaire Peter Thiel and conservative author J.D. Vance, who has since announced he’s running for Senate in Ohio.
Amid people’s concerns about censorship on prominent platforms and the addition of new content creators to its site, Rumble reports its viewership is rapidly expanding. Rumble has said its user growth surged this year from 1.6 million monthly average users in 2020’s third quarter to 36 million monthly active users in 2021’s third quarter.
Many of the people turning to Rumble want to contribute to its cause, according to Mr. Pavlovski.
“A lot of our community wants to be able to invest in Rumble,” Mr. Pavlovski said. “They’ve asked to do that since we started and it’s one of the more popular requests we get is how do they help Rumble and how do they invest in Rumble? And going out and becoming public pending this merger and approval, that will give them an opportunity now to really get behind a company that they believe in the mission.”
The peril of teaming with investors in a SPAC is a challenge faced by private companies across many industries. BuzzFeed, the media outlet, intends to go public on Monday with the help of a SPAC, but The Wall Street Journal said Friday that many of that SPAC’s investors are withdrawing. About 94% of the $287.5 million raised by the SPAC has been withdrawn, according to the newspaper.
Trump Media & Technology Group and Digital World Acquisition Corp. did not respond to requests for comment for this article.