U.S. regulators clear Trump's media firm deal with Digital World (updated)

Phunware

15/02/2024 17:10

(Recasts headline and first paragraph, adds background on TMTG
and DWAC)
    By Helen Coster and Sruthi Shankar
       Feb 15 (Reuters) - The U.S. Securities and Exchange
Commission on Thursday cleared the way for blank-check
acquisition company Digital World Acquisition Corp's  DWAC.O 
merger with former U.S. President Donald Trump's media and
technology company.
    Digital World said a registration statement for its proposed
merger with Trump Media & Technology Group (TMTG), the operator
of social media platform Truth Social, was declared effective by
the SEC.
    The closing of the deal would be a major boost for Trump,
who will hold a stake of about 58% in the newly-formed company. 
    DWAC shares soared nearly 30% on Thursday morning, and were
last trading up 20% at $52.16, having touched a session high of
$56.30. Shares of video-sharing platform Rumble  RUM.O , which
is popular with conservatives, rose nearly 11%, while software
developer Phunware  PHUN.O , hired by Trump's 2020 presidential
re-election campaign to build a phone app, rose 1%.
    Phunware was one of the most traded stocks across all major
U.S. exchanges. 
    Digital World said it expects to announce the date of a
special meeting of its stockholders to vote on the approval of
the merger within two business days. Representatives for DWAC
did not immediately respond to a request for comment.
    The stock has surged more than 150% since Jan. 15, when
Trump won the Iowa caucus in his push as a Republican nominee
for this year's presidential election.  
    TMTG’s founders launched the company as a way for Trump to
connect with his followers after he was cut off from major
social media platforms following the Jan. 6, 2021, attack on the
U.S. Capitol by his supporters. 
    Trump, who is frontrunner for the Republican party’s
presidential nomination, has 6.61 million followers on Truth
Social, compared to the more than 88 million followers he had on
Twitter when the platform permanently suspended him, and the
87.4 million followers he currently has on that platform, now
called X. 
    On Nov. 19 the San Francisco-based app reversed its position
under billionaire Elon Musk, the self-proclaimed “free speech
absolutist” who bought Twitter on Oct. 2. 
    Digital World has faced several challenges since its October
2021 deal with TMTG. It has been the target of investigations by
the U.S. Department of Justice and the SEC, ousted its chief
executive, and shook up its board. 
    Those investigations have contributed to the deal’s delay.
In July 2023 DWAC reached an $18 million settlement with the
SEC, which had charged DWAC with making material
misrepresentations in filings to the SEC as part of DWAC’s
initial public offering and proposed merger with TMTG. 
    The SEC found DWAC misled investors and the SEC by failing
to disclose that it had formulated a plan to acquire and was
pursuing the acquisition of TMTG prior to DWAC’s initial public
offering, in violation of federal securities laws.
    In August, Trump broke a pledge to stick exclusively with
Truth Social, and posted on X his mug shot from his booking at
Fulton County Jail in Georgia. He has not posted on X since,
using Truth Social as his primary platform to reach voters. 

 (Reporting by Sruthi Shankar in Bengaluru and Helen Coster in
New York; Editing by Sriraj Kalluvila, Anirban Sen and Daniel
Wallis)
 ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223
8780; outside U.S. +91 80 6182 2787;))