Trump SPAC stock falls on news of SEC probe

In early November, the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) sent Digital World Acquisition Corporation “preliminary, fact-finding inquiries” related to the special purpose acquisition company’s plans to merge with Trump Media & Technology Group, the company disclosed in a securities filing Monday.

The investigations were both preliminary when the requests for information were sent to Digital World Acquisition, the SPAC said in the filing, adding that both bodies stated that they have not reached any conclusions. Spokespeople for DWAC and Trump Media did not immediately respond to Fortune’s requests for comment.

Digital World Acquisition’s shares fell in trading following the news, dropping by more than 8% before bouncing back up. As of 12:17 p.m. ET, the stock was down 2.4% to $43.89.

FINRA’s request sought information related to “a review of trading” that took place ahead of the Oct. 20 announcement between the SPAC and Trump Media, according to the filing. The SEC, meanwhile, asked Digital World Acquisition for a flood of information and documents, including its trading policies, the identities of some of its investors, and details on the communications between the SPAC and Trump Media.

SPACs are publicly traded blank-check companies launched to merge with a private company, which then takes over its stock exchange listing. It’s a structure that was in vogue for much of the first half of 2021, as companies raced into the public markets. But regulators and lawmakers including SEC Chair Gary Gensler and Sen. Elizabeth Warren (D-Mass.) have been outspoken in their skepticism about the model and whether everyday investors are being fleeced as a result of inadequate disclosures about how SPACs work.

The Trump SPAC has not been immune from such concerns, either.

A week after the deal between Digital World Acquisition and Trump Media was announced, the New York Times reported that Patrick Orlando, the SPAC’s sponsor, and Trump discussed a potential SPAC deal months before the blank-check company hit the markets. In the world of SPACs, discussions with possible merger partners are limited to after the SPAC goes public as sponsors are not supposed to be able to take their companies public with a target already identified.

On Nov. 17, Warren asked Gensler and the SEC in a letter whether the agency is examining the reports.

The probes cap off what has been a wild spell for Digital World Acquisition and Trump Media. On Saturday, the SPAC announced that it had raised $1 billion in committed capital through what is known as a private investment in a public equity. The investors who participated were not disclosed—despite such information being the industry norm.