Donald Trump’s new social media company and says it has secured $1 billion in private capital from "a diverse group" of unanmed institutional investors, though it announced the deal is now under federal scrutiny for potential violations of trading regulations.
The former President launched his new company, Trump Media & Technology Group (TMTG) in October. He has announced plans for a new messaging app called ‘Truth Social’ to rival Twitter and Facebook that banned him following the Jan. 6 insurrection at the U.S. Capitol.
Trump is listed as chair of TMTG, which would control 80% of the future assets. If the deal goes through, Trump could get tens of millions in special bonus shares, potentially resolving his financial problems for years to come, even after paying all his legal bills.
But the new company still faces major hurdles before it can officially launch next year.
The company said Monday that U.S. regulatory agencies, the SEC and FINRA, have asked for information regarding stock trading and communications with Trump’s company before the deal was announced.
The investigation does not mean that regulators have found "any violations of Nasdaq rules or federal securities laws have occurred," the company said.
U.S. Sen. Elizabeth Warren, D-Massachusetts, called on the SEC to investigate possible securities violations related to TMTG's merger with a newly formed, little-known public fund called Digital World Acquisitions Corp (DWAC).
It noted that the company "may have committed violations by holding undisclosed, private merger discussions as early as May 2021, while omitting this information (from SEC) and other public filings."
Trump still an attractive proposition
The one-billion-dollar investment would appear to demonstrate the former US president's ability to attract strong financial interest despite losing re-election and the investigation into his actions as president and at the helm of his real estate company, The Trump Organization.
"$1bn sends an important message to Big Tech that censorship and political discrimination must end," Trump said in a statement at the weekend. "As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech."
It remains unclear if Trump still plans to take his new company public, though the latest injection of investor cash could tempt him to revert to keep it private.
TMTG’s stated plan is to become a publicly listed company through a merger with the publicly traded Digital World Acquisition Corp., a so-called ‘blank cheque company' (or Special Purpose Acquisition Company or SPAC), with the specific goal of acquiring a private company and taking it public.
Digital World originally raised $293 million when it launched in October, and began trading at $10 on the stock exchange. It’s value briefly soared to $175 before settling back at around $40 where it has held steady for the last few weeks. By tripling its initial value at offering it became attractive to institutional traders who were given the option to buy at preferential discounts of up to 40%.
The stock dipped on Monday after news of the federal probe, but it bounced back to $43 by early afternoon.
What is Truth Social?
The structure and strategy of Trump’s new media company remain vague and exists largely on paper only.
TMTG is working to launch a social media app called Truth Social early next year, according to a news release. It also plans a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts.
There have been numerous questions for decades about the state of the former president's finances. Last month a congressional committee found he had "grossly exaggerated" the profitability of his Washington DC hotel. Last week he announced he was selling the hotel for $375 million.
He also faces a congressional investigation over his involvement in the Jan 6 assault on the Capitol, and separate probes into his taxes related to The Trump Organization.
“I am confident that TMTG can effectively deploy this capital to accelerate and strengthen the execution of its business, including by continuing to attract top talent, hire top technology providers, and roll out significant advertising and business development campaigns,” Digital World CEO Patrick Orlando said in the release.