Donald Trump’s indictment last week has everyone, including investors buzzing with questions. Bringing charges against a former president that force him into criminal court is unprecedented for the U.S. legal system. Two days ago, Trump’s plane landed in New York to officially surrender to law enforcement officers. Yesterday’s arraignment hearing disclosed that Manhattan District Attorney Alvin Bragg is charging Trump with 34 counts of “falsifying business records in the first degree.” The 34 charges are partly related to Trump’s alleged offering of hush money to former adult film star Stormy Daniels. However, the DA states that the charges imply further crimes, including tax evasion and illegal campaign contributions.
His former home city is bracing for what the New York Times describes as a “consequential week.” The fact that Trump is currently campaigning for the 2024 presidential election makes the matter all the more complicated. Regardless of how the legal issues proceed, they will significantly affect many things, including financial markets. Therefore, Investors may wonder if there are any stocks to sell ahead of the Trump indictment. The answer is yes.
Many eyes are on Digital World Acquisition Corp (NASDAQ:DWAC). The Trump Media & Technology Group’s (TMTG) blank-check partner is more closely linked to the former president than any other company. With Trump’s indictment looming, the company now faces the threat of being unable to complete its merger. As the New York Times reports:
“Without the deal, Trump Media would most likely have to look for new financing just as Mr. Trump’s 2024 presidential campaign could be getting into high gear and with the former president under indictment. The company has been paying its bills with advertising revenue and what’s left of the $37 million raised in an early round of funding.”
However, other companies have a lot to lose if Trump’s legal troubles drag on. Let’s take a closer look at the best stocks to sell before they take a turn for the worse.
Stocks to Sell: Digital World Acquisition Corp (DWAC)
As Donald Trump goes, so does DWAC stock. And if he is headed for legal troubles, his SPAC is facing an unsettling future. The special purpose acquisition company (SPAC) had hitched its wagon to the TMTG. Now it may be regretting it as it scrambles to close the merger before Trump’s indictment. DWAC stock did enjoy some gains last week as interest in Trump’s pending arrest grew. But as InvestorPlace explained, these types of superficial gains do not make the stock a good buy.
Granted, the troubled stock had problems long before talk of Trump being arrested began. It recently fired CEO Patrick Orlando, but that pales compared to its troubled history of regulatory probes and failure to complete the merger. One month ago, share prices hit a 52-week low as delisting concerns overshadowed the stock. It’s also a distinct possibility that Trump’s legal team, or Judge Merchan, will ban him from using social media as he awaits trial, giving users less reason to use Truth Social. For as long as he is in legal trouble, which could be for some time, DWAC stock will be highly compromised.
The high uncertainty surrounding DWAC stock makes it a clear choice among stocks to sell.
This little-known penny stock usually only makes headlines when Trump has big news. Phunware (NASDAQ:PHUN) is a digital software producer whose app played an important role in Trump’s 2020 campaign. For that reason, it has remained relevant in the eyes of investors, despite its poor performance. As Fortune reports:
“The app lets Trump’s team communicate directly with the 2.8 million people who downloaded it — more than any other app in a U.S. presidential campaign — and if they gave permission, with their entire contact list as well.”
However, the outlet also notes the small company has a very troubling history, marked by lawsuits and allegations of engaging in false business deals. On top of that, it’s clear that Trump’s indictment will significantly complicate his 2024 campaign, thereby compromising a stock like Phunware. The microcap penny stock hasn’t performed well over the past six months, even as speculation regarding Trump’s next campaign has grown. Now investors have even less reason to bet on it.
If anything happens to stop Trump from running or force him to drop out, PHUN stock will be finished.
Stocks to Sell: Sinclair Broadcast Group (SBGI)
Sinclair Broadcast Group (NASDAQ:SBGI) isn’t well known to the public, but it is responsible for much of Americans’ cable news. The media holding company owns or operates “nearly 200 television stations in some 100 markets covering more than 40 percent of American households.” That gives it tremendous reach, and Sinclair has been accused of promoting conservative ideology, thereby linking it to Trump. In fact, the company played a pivotal role in helping Trump ascend to political power. Unfortunately for Sinclair investors, that means that if his 2024 campaign is compromised, it will be bad news for SBGI stock.
The company’s problems don’t start with Trump. Sinclair recently announced plans to reorganize its business and adopt a new name. That type of news is never reassuring for investors, particularly when a company hasn’t performed well lately. Although SBGI stock has recently risen on the Trump-driven hype, it is still down year-to-date (YTD) by almost 40%. That’s likely only to worsen as Trump’s troubles drag on and viewers are pulled away from local news stations to bigger networks like Fox (NASDAQ:FOX).
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risk.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.