SPAC Tied to Trump Media Says Early Talks Were Not ‘Substantive’

For nearly a year, regulators have been examining whether a proposed merger involving the social media company backed by former President Donald J. Trump broke securities laws.

To save the deal ahead of a December deadline, lawyers for Digital World Acquisition Corp., the special purpose acquisition company that plans to merge with Trump Media Technology Group, recently met with regulators to plead their case. Trump Media stands to get $300 million if the deal is completed, money it would use to fund its Truth Social media platform.

Digital World’s case could hinge on the meaning of the word “substantive.”

Under S.E.C. rules, SPACs are not allowed to hold discussions with potential merger partners before they go public, and if they do, the talks must be disclosed. Failure to do so could constitute securities fraud.

When it filed its papers to go public in September 2021, Digital World said there had been no “substantive discussions, directly or indirectly” with any potential merger targets — a standard disclosure in SPAC deals. A month later, it announced that it would merge with Trump Media.

Article source: https://www.nytimes.com/2022/10/25/business/trump-media-spac-sec.html