Trump's sons and the art of making millions from microcaps

A fund that includes President Donald Trump's eldest sons among its investors has booked hundreds of millions of dollars in paper profits through a lucrative playbook that involves taking stakes in a steady stream of small, thinly traded public companies.

The $1 billion vehicle, American Ventures, is the creation of a Trump Tower-based boutique bank called Dominari Holdings, which counts Donald Trump Jr and Eric Trump among its advisers and shareholders. It has so far invested in at least 10 so-called microcaps, generating millions of dollars in paper gains for the President's sons and other limited partners, in part by using financial instruments called warrants it receives in the deals.

An analysis of its recent transactions by Bloomberg News shows a pattern: The fund makes an initial investment in or starts providing advisory services to a little-known company, like a toymaker or a golf country club operator in Florida. In exchange, American Ventures receives warrants. These contracts give holders the right to buy shares at a set price in the future.


Shares of these target companies can spike quickly - on at least one occasion, an announcement of the Trumps' involvement spurred a 12% run-up in a single day.

The gains depend on the market value of the warrants, which can fluctuate sharply. Bloomberg's calculations are based on publicly disclosed warrant terms and prevailing share prices. Filings show many of the warrants were exercisable immediately, though at least one deal included ownership caps that limited how many shares American Ventures could acquire at one time. It is not clear how much of the gains, if any, have been realised.

The use of warrants isn't itself unusual. But American Ventures has one major advantage: the inclusion of the Trump brothers in some of its deals, injecting a dose of attention-grabbing star power .

Notorious Volatility

The investment pattern at American Ventures shows how large gains can come from bets on small public companies, paired with complex financing deals and the attention that comes from high-profile connections straddling finance and politics. The result is a growing portfolio of paper gains that underscores the financial power of the family's brand, and the big paydays that can come from their affiliation with small companies operating in thinly traded markets.

"Microcap stocks are notorious for their volatility and illiquidity of the shares," said Jim Angel, a business professor at Georgetown University. "Prices can swing dramatically on the hint of any kind of news."

In a statement, Eric Trump said he is "a passive investor in American Ventures and has no management role."

Big Profits

The way American Ventures is structured, each new transaction comes with a distinct set of investors, on average about 18 each. Last year, American Ventures received nearly 60 million warrants in Aureus Greenway Holdings Inc., a Florida golf country club operator. The warrants let the fund buy shares at $1 and $1.25. Asthe stock was already trading above those prices, the warrants were immediately in the money, giving American Ventures the right to buy shares below the market price, subject to ownership limits in the deal.