Trump Media Surges Amid Short Seller Battle
In a striking turn of events, Trump Media & Technology Group stock (DJT) witnessed a surge of over 25% on Thursday, a move aimed at counteracting short sellers during a week of intense volatility. The interest in short positions for DJT stock — investments made with the expectation that the stock price will decline — has risen to approximately 13% of outstanding shares, an increase from the 11% noted during its initial public offering. This contrasts sharply with the average short interest in public companies, which typically ranges from 3% to 4%.
Following a merger with Digital World Acquisition Corp, a special purpose acquisition company (SPAC), Trump Media made its debut on the Nasdaq, a move that was greenlighted by shareholders recently. Despite the initial enthusiasm, shares have plummeted by about 55% since the end of March.
In a strategic move to safeguard against short-selling, the company recommended investors to instruct their brokerages to restrict the lending of their shares for short positions. Trump Media also provided a template letter for investors to use when communicating with their brokers, alongside advice to opt out of any securities lending programs and to consider holding their DJT shares in a cash account to further protect their investment.
The backdrop to these recommendations was a challenging week for the company, highlighted by a significant share tumble after announcing its intention to issue over 21 million shares. Shortly afterward, the unveiling of a new live TV streaming platform was made public.
Truth Social, another venture by the former president, retains around a 60% stake from Trump. Currently valued at roughly $30 a share, Trump Media boasts a market capitalization of close to $4 billion, translating to a significant $2.4 billion stake for the former president. This marks a substantial decline from the over $4.5 billion worth at the time of the company's market entry.
The launch of Truth Social was a direct response by Trump after being banned from major social media platforms following the January 6 Capitol riots in 2021. Despite the initial ban, Trump has since been reinstated on these platforms.
Financially, Trump Media disclosed sales slightly over $4 million against net losses nearing $60 million for the year ending December 31. The company has cautioned stakeholders about the anticipation of continued losses, highlighting the challenging path towards profitability.
Additionally, Trump Media underscored a six-month lockup period for stakeholders, restricting the sale or transfer of shares unless under exceptional circumstances approved by the company's board.
In parallel, the former president faces a significant $454 million fraud penalty and a funding deficit for his 2024 election campaign against Biden. Trump has recently secured a $175 million bond in the fraud case, effectively delaying the final payment as he appeals the decision. He is also entangled in a criminal trial related to alleged payments to adult film star Stormy Daniels.
This tumultuous week for Trump Media throws a spotlight on the complex interplay between market dynamics, legal challenges, and the unpredictable nature of startup ventures in the heavily scrutinized media landscape.
Analyst comment
Positive news: Trump Media & Technology Group stock witnessed a surge of over 25% to counteract short sellers.
Analyst prediction: The market for DJT stock is expected to remain volatile due to short-selling interest and the challenging path to profitability, influenced by legal challenges and the unpredictable nature of startup ventures in the media landscape.
