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## Shares of Digital World Acquisition Corp. Surge After SEC Settlement
Shares of Digital World Acquisition Corp. (DWAC) saw a significant boost of over 50% in value following the company's announcement of a settlement with the Securities and Exchange Commission (SEC) for fraud charges, resulting in an $18 million penalty. This surge brought DWAC's stock to around $20, still far below its peak of over $95 in March of the previous year.
### DWAC's Merger with Trump Media & Technology Group
DWAC, a special purpose acquisition company (SPAC), revealed plans in October 2021 to merge with Trump Media & Technology Group (TMTG), the parent company of the upcoming Truth Social platform. However, the merger faced several delays since its announcement.
### Terms of the SEC Settlement
Under the settlement with the SEC, DWAC is obligated to pay an $18 million civil penalty if it completes the merger with TMTG and takes the company public. However, if the merger fails to occur by January 1, 2025, and DWAC returns investors' funds, the SEC has agreed to waive the penalty.
### Allegations of Improper Merger Discussions
The SEC alleged that improper discussions about the merger took place, as SPACs are prohibited from soliciting specific merger targets before filing for an initial public offering. This settlement arises following the recent charging of three individuals in Florida for insider trading related to DWAC.
### Legal Troubles for Trump
The DWAC settlement is the latest addition to the list of legal problems faced by former President Donald Trump and his businesses since his departure from the White House in 2021. Trump is currently facing state charges in New York for falsifying business records and a federal court indictment for mishandling classified documents. Additionally, authorities in Georgia are investigating his attempts to overturn the results of the 2020 presidential election.
Both DWAC and Trump's team have not yet provided any comments regarding the settlement.
## Conclusion: Impact on New Business and Implications for Investors
The surge in Digital World Acquisition Corp. (DWAC) shares following their settlement with the SEC raises interesting questions about the impact on new businesses and the implications for potential investors.
1. **Increased Scrutiny and Transparency:** The SEC's allegations of improper merger discussions highlight the importance of adhering to regulations and avoiding potential legal pitfalls. This settlement serves as a reminder that regulatory bodies are closely monitoring SPACs and their merger activities. As a result, new businesses seeking to go public through SPAC mergers may face increased scrutiny and will need to ensure they are in full compliance with regulatory requirements.
2. **Reputation Risk for Merger Targets:** DWAC's merger plans with Trump Media & Technology Group (TMTG) faced various delays, and now the settlement has further tainted the image of both companies. New businesses considering mergers with SPACs or high-profile individuals should weigh the potential reputation risks associated with such partnerships. The legal troubles faced by former President Donald Trump and his businesses could have a negative impact on the perception and valuation of merger targets.
3. **Investor Confidence and Caution:** The volatility in DWAC's share price, despite the surge, serves as a cautionary tale for investors. The substantial drop from its peak in early 2021 highlights the risks associated with investing in SPACs, especially when controversial figures or legal uncertainties are involved. New businesses seeking investment through SPACs should be aware that the association with such factors can significantly impact investor confidence and stock performance.
In conclusion, the DWAC settlement and its subsequent impact on share prices have shed light on crucial considerations for new businesses. They must prioritize regulatory compliance, carefully assess reputation risks of potential merger partners, and be aware of the implications on investor confidence. By doing so, new businesses can navigate the complex landscape of SPAC mergers and investor expectations more effectively.
Article First Published at: https://www.cnbc.com/2023/07/21/trump-linked-dwac-soars-50percent-after-sec-fraud-settlement-.html