Digital World Acquisition Corp. (NASDAQ: DWAC), a special acquisition purpose company (SPAC) aiming to take Donald Trump’s social media platform public, saw its share price surge drastically after DWAC announced it had reached a settlement with the Securities and Exchange Commission (SEC) over its fraud charges.
DWAC shares closed 50.3% higher on Friday, July 21, propelling its stock market price to $20.08.
Over the past week, the company’s shares rose by around 54%, while its year-to-date gains stand at 31.1%.
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The latest spike represents a notable increase for DWAC, although it remains far below its all-time high of more than $95 reached in March 2022.
DWAC to pay $18 million civil penalty fee for misleading investors and the SEC
The upswing in DWAC stock comes after the company said it came to a $18 million settlement with the SEC, which sued SPAC for fraud on July 20.
In October 2021, DWAC announced plans to merge with Truth Social parent firm Trump Media & Technology (TMTG), a media and tech company led by former US President Donald Trump.
However, since the announcement, the merger faced a string of delays. The newly-agreed settlement with the securities regulator means that DWAC has to pay a $18 million civil penalty fee if it proceeds to merge with TMTG and takes it public. On the other hand, if the merger is not completed before Jan. 1, 2025, deadline, and the SPAC returns investors’ money, the SEC has agreed to waive the punishment.
The commission accused DWAC of initiating improper merger discussions. In the US, it is illegal for SPACs to request specific merger targets before an actual initial public offering (IPO) filing.
“The Commission finds that DWAC misled investors and the SEC by failing to disclose that it had formulated a plan to acquire and was pursuing the acquisition of TMTG prior to DWAC’s IPO.”
– the SEC wrote in its lawsuit against DWAC.
The DWAC settlement represents one of several legal issues that Trump and his businesses started to face since he left the White House two years ago.
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