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What is the best way to express support for Donald Trump's Presidential ambitions in your asset allocation decisions? This is not a question I expected to ask myself. It would take quite a while to unpack for anyone waking from a ten-year coma. But here we are.
One could invest, straining that word's usage to the breaking point, in Trump digital trading cards.
OpenSea
I have some concerns that the non-fungible token ("NFT") market was largely a creature of the zero interest rate environment and Covid-led boredom. Prices and liquidity could dry up in the years ahead. So I'm not a buyer, but still find the phenomenon noteworthy.
Rumble Inc. (RUM, RUMBW) is a right-leaning video platform whose short-term prospects appear somewhat tied to Trump's. I'm passing on this one too, but it is at least one to consider.
My least favorite Trump idea is Digital World Acquisition Corp. (DWAC). There is no reason that you should own it today. First, I want to examine why it has raced, then offer three good alternatives for DWAC owners.
Trump is doing exceedingly well in the Republican nomination battle. Betting markets have him at a 95% chance of winning New Hampshire's primary today and tied with President Joe Biden for the general election. The RCP poll average shows Trump ahead by about 55% for the nomination and ahead by about 3% in a general election against Biden. So, betting on Trump for the nomination appears to be close to a lock. However, I rarely like actually betting on something with a >90% market-implied probability. There is a unitary risk of something happening unexpectedly such as, in this case, a legal or medical surprise. Betting on Trump for the general election is a completely plausible bet. But doing it with DWAC is suboptimal.
DWAC is the SPAC in a deal to buy Trump Media & Technology Group, parent company of Truth Social, where Trump posts after he left Twitter/X. It is not completely clear that the deal will get done. The SEC has clearly had misgivings about the combination so far and still needs to sign off on their proxy documents. If it breaks, then DWAC equity is worth about $10.65 of cash per share and DWACW warrants are worth about $0.00. If the deal gets done, then it could be a short-term positive as a trading vehicle for Trump fans to express solidarity.
But here's a better option: sell your DWAC. Sell every share. Today. I could (and perhaps should) leave it at that. But if you really want exposure to DWAC, I'll stipulate the wisdom therein and propose an alternative: buy DWACU units with the proceeds. Each unit gets a share along with half of a DWACW warrant. Prices are moving rapidly, but as of this writing, the equity cost is $48.98 and the warrant cost is $18.50. So, the unit should cost $58.23, but it costs only $52.51. Ask your broker to split the unit, which typically takes 2-5 days. Sell the warrants. Do what you want with the stock, which you've just created at around $43.26 per share.
How else might one bet on Trump? Both President Biden and Trump are big spenders; there aren't a lot of actionable items on taxes and spending. But Biden uses the administrative state to regulate more aggressively. There is a possibility that we see both the end of the Chevron Doctrine deferring to regulators at the Supreme Court at around the same time as the end of the Biden administration. So, companies that have suffered under aggressive regulatory burdens could flourish. One of the most leveraged bets on Trump is Fannie (FNMA, FNMAS, FNMAT) and Freddie (FMCC, FMCKJ, FMCCH); they've suffered under Biden but could have a route to realizing value under Trump. Their prefs have more ways to win than common.
Caveat
The DWACU idea is premised upon the view that the equity is worth $48.98 - a view demonstrably held by anyone who owns that equity. I stipulate without sharing it.
Conclusion
Today, there are better ways than buying DWAC to express a bullish bet on Donald Trump.
TL; DR
It is right there in the title: sell your DWAC.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
Find better ideas than a Trump NFT or Trump SPAC here (or anywhere else).
