Trump-themed stocks surged 3 times... US retail investors say "Still buy and double down"

[Image source=Yonhap News]

What are the odds that a stock listed on the US Nasdaq could surge more than sixfold in just 11 trading days? While Wall Street considers it highly unlikely, there is speculation that if it is a Trump-themed stock, such a scenario is not entirely impossible. In fact, on the 23rd (local time), former President Donald Trump secured a victory in the Republican second primary held in New Hampshire, bringing this needle-in-a-haystack possibility one step closer.

Digital World Acquisition (DWAC) is a representative Trump-themed stock linked to the leading Republican presidential candidate, former President Donald Trump. It is a Special Purpose Acquisition Company (SPAC) established to merge with Truth Social, Trump’s social media platform, and its parent company Trump Media and Technology Group (TMTG).

On the 11th, this stock was priced at only $16.92 per share, but it closed at $50.75 on that day, soaring more than threefold in just seven trading days. This surge was fueled by news that Ron DeSantis, Governor of Florida, declared his support for Trump after dropping out early, following Trump’s landslide victory with a majority vote in the first Republican primary held in Iowa. On the 22nd, the stock even rose 88% in a single day.

DWAC 3-Month Stock Price Trend [Image Source=Naver Pay Securities]

As time passes and former President Trump becomes the presumptive Republican presidential nominee, interest in Trump-themed stocks appears to be heating up. According to a Bloomberg report on the 24th, some call option traders are betting that DWAC will reach $100 within just three trading days. As of 2:43 p.m. the previous day, the number of trades placed on this call option was a whopping 13,200, making it the most popular contract in that session, Bloomberg reported. Exercising this call option would require the stock price to rise 92% by the close of trading on the 26th.

How is Wall Street evaluating this? Danny Kirsch, head of options at Piper Sandler & Co., said, "It is unusual to fully exercise calls that expire in three days," but added, "Given that this stock has risen 80% over the past two days, it is not impossible."

Kirsch also predicted, "If Trump wins big in New Hampshire, the stock price will likely rise further tomorrow." Indeed, on that day, former President Trump defeated Nikki Haley, former UN Ambassador and Republican presidential contender, in New Hampshire following his victory in Iowa.

However, there are also criticisms that buying into a theme stock that has already surged rapidly is not an appropriate investment strategy. Since the stock price has risen significantly relative to the company’s value, selling pressure is bound to increase, and even if Trump becomes the final nominee, the stock price could fall due to the fading of the catalyst. Moreover, DWAC is facing difficulties in its merger, including failure to obtain approval from the US Securities and Exchange Commission (SEC) due to regulatory violations, adding considerable uncertainty about its future.