The S.E.C. Turns Up the Heat on Trump’s SPAC Deal

New twists in the timeline

Digital World, the special purpose acquisition company that struck a deal to merge with former President Donald Trump’s media venture, revealed yesterday that it was under investigation by the S.E.C. The disclosure came as the SPAC filed to raise as much as $1 billion in a deal that would be completed shortly after it combined with Trump Media & Technology Group.

The Times’s Matthew Goldstein, David Enrich and Michael Schwirtz have uncovered other details about Trump Media’s SPAC deal, which could explain the scrutiny that it faces.

Digital World’s C.E.O. met with Trump’s representatives to talk about a deal in April, five months before the SPAC sold shares to investors. Patrick Orlando, the Digital World chief, was also running other SPACs at the time, and it’s unclear which he was representing on the videoconference, which The Times was first to report. The chief legal officer for Trump Media said that the call was “strictly discussions between” the company and Benessere, another SPAC that Orlando ran.

SPACs are allowed to sell their shares to the public with limited disclosures, as long as they don’t have any acquisitions already in the works. In a September filing, Digital World stated that the company and its executives had not engaged in any “substantive discussions, directly or indirectly,” with a target company.

The S.E.C. is asking questions about the Trump Media merger. Digital World said that the agency had requested information on investors in the deal and communications it had with representatives of Trump’s company. The S.E.C. has voiced concerns about SPACs in general, but it hasn’t been very active in policing them, said Thomas Gorman, a partner at Dorsey & Whitney who spent seven years at the agency.

The regulator has never charged a SPAC for planning a deal before selling shares, Gorman told DealBook, but the punishment for doing so could be harsh. “The deal will likely collapse if the S.E.C. sues,” Gorman said.

A financier behind Digital World could also face scrutiny. ARC Group, a Shanghai-based firm that tried its hand at several businesses before settling on SPACs, is a main backer of Digital World and also participated in the April videoconference call. ARC initially favored a merger with Benessere, but executives at that SPAC didn’t want to do business with Trump. ARC then turned to Digital World, where it had recently installed Orlando as C.E.O.

ARC has had run-ins with the S.E.C. before: The agency prevented it from listing three companies in 2017, citing material misstatements.

Trump Media is pushing ahead. Last night, Representative Devin Nunes, a California Republican and prominent Trump supporter, said he was quitting Congress to lead the venture. On Monday, the company projected it would have 81 million users by 2026 for its social media network, named Truth Social, and another 40 million paid users for a proposed streaming service.

HERE’S WHAT’S HAPPENING

Evergrande is on the brink of default. Bondholders of the embattled Chinese real estate developer said they haven’t been paid after a deadline for $82 million in debt passed yesterday. Chinese regulators, who have stepped up their involvement in Evergrande’s business, must decide whether to intervene to prop up the lender or stand back and risk the economic upheaval of a restructuring.

Instagram unveils new parental controls ahead of a big day before Congress. The Meta-owned social network will let parents see how much time their teens have spent on the service and set limits. The move comes as Adam Mosseri, Instagram’s chief, is set to testify before the Senate tomorrow about whether social media harms children and teens.

BuzzFeed’s market debut fizzles. Shares in the digital media publisher fell 11 percent yesterday after the company went public by merging with a SPAC. That, coupled with the deal raising less money than expected, may foreshadow trouble for other digital publishers looking to go public.

Exxon Mobil sets a net-zero goal for its Permian Basin operations. The oil giant is aiming to cease all emissions from its fields in West Texas and Mexico, a major area of operations, by 2030, with measures like electrifying facilities and stopping the burning of waste gas from wells.

The N.Y.S.E. and Samsung shake up their leadership ranks. The Big Board said that Lynn Martin would replace Stacey Cunningham as its president, while Jeffrey Sprecher, who led Intercontinental Exchange’s takeover of the exchange, will step down as chairman. Meanwhile, Samsung named new leaders for its computer chip division and a unit that combines its mobile and consumer electronics operations.

Covid and the stock market

The Omicron variant of the coronavirus has raised concerns that the pandemic could continue to weigh on the global economy, and these fears are reflected in the stock market. But financial markets appear to have taken the latest virus news in stride relative to earlier outbreaks.

Each bout of pandemic-driven volatility in stocks has been shorter and milder than the one before, followed by a recovery to a new high (check out the charts here). Yesterday, the S&P 500 had recovered nearly all of its losses since the Omicron variant was flagged by health officials in late November. And futures are trading up today, suggesting that the Omicron downturn may nearly be over.

More coronavirus news:

• Early signs suggest that Omicron may cause less serious illness than other forms of the virus.

• New rules for travel to the U.S. have taken effect, requiring passengers to provide proof of a negative coronavirus test no more than a day before their flights.

• A new survey found that Gen Z is more stressed out by the pandemic than older age groups.

The case of the hedge fund manager and $70 million in stolen relics

Federal prosecutors in Manhattan yesterday announced the first lifetime ban on collecting antiquities, imposed on one of the world’s most active collectors of ancient art, the hedge fund billionaire Michael Steinhardt. The ban is part of an agreement not to file criminal charges against Steinhardt in exchange for the surrender of 180 stolen objects valued at $70 million.

Steinhardt had “a rapacious appetite for plundered artifacts” that relied on a “sprawling underworld of antiquities traffickers, crime bosses, money launderers and tomb raiders,” Cyrus Vance, the Manhattan district attorney, said. His office said it opted for this resolution rather than a long trial to allow for the quick return of the relics.

Steinhardt put the evidence on display. In 2017, authorities began investigating the prolific collector after he lent a marble bull’s head statue to the Metropolitan Museum of Art that had been stolen from a temple in Lebanon during the civil war there. This probe led them to more ancient works in Steinhardt’s homes and offices (here is a rundown of some of the pieces). An investigation looked into the origins of more than 1,000 pieces he had traded since 1987.

Steinhardt’s lawyers told Artnet that he is “pleased” wrongfully taken items will be returned and has “reserved his rights to seek recompense from the dealers involved,” noting that many of them claimed to have obtained the items lawfully.

A mandate to mandate?

Mayor Bill de Blasio of New York has announced a sweeping coronavirus vaccine mandate for all private companies in the city. Starting Dec. 27, all employees who work in-person are required to have at least one shot of the vaccine, with no option to undergo weekly testing instead of being vaccinated.

It could be the broadest corporate vaccine mandate yet: A federal mandate for large private companies, first announced by President Biden in September, has been stalled by legal challenges. New York City’s mandate would apply to around 184,000 businesses.

The impact of the new rule will depend on answers to these questions:

Is it legal? The city’s mandate is based on different legal considerations than the federal mandate, Lawrence Gostin, a Georgetown law professor who specializes in public health, told DealBook. “New York City has considerable home rule and very broad public health powers,” he said. But De Blasio did not get specific authorization from the City Council to enact the mandate, Gostin said, and an “inevitable avalanche of legal challenges” could argue that the mayor is overstepping.

What happens when De Blasio’s term ends? His successor, Eric Adams, will take office on Jan. 1 — about a week after the vaccine mandate is set to go into effect. His spokesman told The Times that the mayor-elect would evaluate the measure once he takes office.

What is required of companies, exactly? Kathryn Wylde, the president of the Partnership for New York City, said businesses were “blindsided” by the mandate. In an interview with DealBook, she asked: “How is it supposed to be enforced? What’s going to be the compliance procedure? What kind of records do they have to keep?” City Hall plans to release further guidelines on Dec. 15.

What about labor shortages? Many of the unvaccinated workers in the city, where nearly 90 percent of adults have received at least one shot, don’t trust the system, Wylde said, “and it’s just very hard for employers to come down on them with an inflexible policy.” A group of retailers pushing back against the mandate cited labor shortages in their opposition. But others argue that mandates may make retaining employees easier. “The vast majority of employees and customers want to work or shop in a safe environment,” Gostin said. A survey of employers last month found that 3 percent of respondents with vaccine mandates had seen a spike in resignations.

THE SPEED READ

Deals

• Intel is planning a public offering for MobileEye, a maker of autonomous vehicle technologies, at a potential valuation of over $50 billion. (NYT)

• The E.U.’s antitrust regulator is scrutinizing Microsoft’s $16 billion acquisition of Nuance, after the U.S. declined to contest the deal. (Reuters)

• The software-focused buyout firm Thoma Bravo reportedly plans to raise up to $35 billion for its next fund. (FT)

• Jack in the Box is buying Del Taco in a $575 million deal. (CNBC)

Policy

• The Bank for International Settlements called for greater regulation of so-called decentralized finance. (FT)

• The S.E.C. is investigating Tesla over a whistle-blower’s allegations that the company didn’t notify shareholders about fire risks associated with its solar panels. (Reuters)

• Rohingya refugees sued Facebook for $150 million, accusing the social network of amplifying hate speech against them in Myanmar. (Axios)

Best of the rest

• “Americans’ Pandemic-Era ‘Excess Savings’ Are Dwindling for Many” (NYT)

• Disney plans to announce that it has hired Geoff Morrell, the top communications executive at BP, to oversee P.R. and government policy.

• A U.S. jury ordered a man who claims to have created Bitcoin to pay $100 million in damages in a business dispute, but didn’t settle who invented the cryptocurrency. (Bloomberg)

• Over the course of their careers, female doctors earn at least $2 million less than their male counterparts. (NYT)

• The pandemic has driven more millennials to write wills. (WSJ)

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