– Digital World Acquisition Corp (DWAC) faces a possible $18 million civil penalty and must amend its IPO filings to resolve an ongoing SEC investigation concerning its merger with Trump Media & Technology Group (TMTG).
– TMTG has not agreed to the settlement, potentially leading to the termination of the merger agreement, while DWAC remains optimistic about the settlement being in the best interest of its shareholders.
Digital World Acquisition Corp (DWAC) has become the latest contestant in the “How to Displease the SEC and Make a Boatload of Trouble for Yourself” game show. The blank-check company has been handed a possible way out of an ongoing investigation concerning its merger with Trump Media & Technology Group (TMTG), owner of Truth Social. All it needs to do is pay an $18 million civil penalty and amend its IPO filings, a task comparable to rearranging deck chairs on an already sinking ship.
However, in a brilliant twist of irony, the subject of their merger, TMTG, has not agreed to this settlement. It’s as if you agreed to sell your house with a termite problem by promising to call in pest control, but the termites have declared they’re not leaving. This could lead to the termination of the merger agreement, which in the world of SPACs, is about as welcome as a skunk at a garden party.
Now, if the SEC grants the nod to this agreement, DWAC will receive a cease-and-desist order, a glamorous paperwork that basically says, “You’ve been naughty, now stop it.” The SEC has found that DWAC violated “antifraud provisions” linked to certain statements, agreements, and omissions about the timing and discussions DWAC had with TMTG. It’s like being scolded by the school principal for passing notes in class, only with more zeros and legal jargon involved.
While these terms are not yet definitive and need the SEC’s stamp of approval, the merger deal between DWAC and TMTG, a scheme designed to publicly launch former President Trump’s media group, has been under the microscope from regulators and prosecutors. This is the corporate equivalent of having your parents and the school board attend your detention hearing. Talk about a tough crowd.
DWAC, however, sounded more optimistic than a lottery ticket holder. It stated that the settlement is in the best interest of its shareholders, aiming to dodge a potentially lengthy legal brawl with the SEC. They insisted on proceeding with the transaction to craft an alternative media platform and deliver value to shareholders. It’s like promising your kids a trip to Disneyland while the eviction notice is being nailed to your front door.
Adding to this corporate soap opera, federal prosecutors last week decided to gift three investors with insider trading charges linked to this merger. These investors supposedly used non-public information to make a whopping over $22 million in October 2021. Just imagine making millions off a deal that’s more tangled than a plate of spaghetti, and then getting arrested for it. It’s the Wall Street version of a tragicomic opera.
So, as this saga continues, one thing is clear: In the universe of mergers and acquisitions, there’s never a dull moment. And DWAC might want to think twice before diving headfirst into the next venture, or they might just land in another thorny rose bush.