He can’t get over his obsession with China, can he?
A Chinese firm helping former president Donald Trump take his new media company public has been the target of investigations by federal securities regulators, who say the firm misrepresented shell companies with no products and few employees as ambitious, growing enterprises, documents and interviews show.
Arc Capital, an investment advisory firm based in Shanghai, has repeatedly helped create or finance companies with little or no revenue, no customers and office locations that point to P.O. boxes, according to a Washington Post review of regulatory and court filings. One claimed to be developing autonomous drone software despite having no employees; another said it operated a publicly traded in-home bakery “specializing in freshly-made cakes and cupcakes” before saying it pivoted into touch-screen technologies for a “diversified blue-chip client base,” regulatory filings show.
The Washington Post has a lot more detail on Arc that non-financial types like me may not really grasp. Except for the fact that there are a lot of shell companies involved that make nothing, sell nothing, and do nothing except attract capital.
This year, Arc helped create Digital World Acquisition, an investment vehicle that has raised over $1.2 billion to conduct a merger with Trump Media and Technology Group. Digital World is what’s known as a special purpose acquisition company, or SPAC, a type of shell business that raises money from investors to acquire a private start-up with strong growth prospects. The deal, which still must be approved by shareholders and regulators, has the potential to enrich the former president and turn his nascent social media start-up into a public company overnight.
True-to-form, Trump is always Trump. Bold promises backed by little but a song and dance:
Still, the lack of specifics in the Trump slide presentation was “hilarious, even compared with other SPACs,” said Michael Ohlrogge, an assistant law professor at New York University who has researched SPAC transactions.
“So far, it’s vaporware,” said James Angel, a professor of finance at Georgetown University. The true test will come after the merger, when shareholders will expect Trump to use the money he has raised to build a formidable business, he said.
“Now that our ex-president has a billion-dollar war chest to play with,” Angel said, “it remains to be seen if he can actually build a successful media franchise.”
Maybe his fascination with China is because authoritarian capitalism (with a bit of misrepresentation thrown in) is just his style.
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