The public debut of Trump Media & Technology Group DJT has been one of the bigger storylines of 2024 and the company is now warning of potential stock manipulation.
A new report said investors shorting the newly public stock have made millions of dollars.
What Happened: After a long awaited SPAC merger with Digital World Acquisition Corporation, Trump Media & Technology Group (TMTG) is now publicly traded. The stock gives investors a way to bet for or against former President Donald Trump and also his social media company.
After hitting a high of $79.38 in its first day of public trading, shares of Trump Media & Technology Group have pulled back.
Several investors have been betting on shares of the media company to fall, despite rising short interest and a high cost to borrow. Data from Fintel shows 10.8% of the float short and a cost to borrow of 214.9%.
Investors interviewed by the Associated Press reported making money betting on shares to fall by shorting the stock and buying put options, as reported by ABC News.
Some of the people betting against the new stock are doing so based on not liking Trump, and many are doing it based on the financials of the company.
"(Trump's) not as a great a businessman as he thinks. A lot of his businesses go belly up, quickly," one interviewee told the Associated Press.
Data from FactSet and S3 Partners shows investors making $200 million in paper profits so far by shorting the stock and using put options.
Related Link: Trump And Biden, Get Ready: 2024 Election Betting Odds Point To Major Showdown
Why It's Important: Some investors recognize the risk of a potential short squeeze that could elevate share prices. They also acknowledge that an increasing number of Trump supporters might purchase the stock to demonstrate support and assist with his legal and fundraising initiatives.
"If DJT starts rallying, you're going to see the mother of all squeezes," S3 Partners' Ihor Dusaniwsky said. "This if not for the faint of heart."
Trump owns 57.6% in the Truth Social parent company – 78.75 million shares, with another 36 million shares potentially owned base on earn-outs. The former president is currently unable to sell shares due to a lock-up agreement that was part of the merger.
Trump selling a large number of shares could also send the share price down in the coming months.
The risk of the company restricting share borrowing complicates efforts to bet against Trump's stock through short selling.
The company has alerted Nasdaq to potential illegal short selling of its stock and is advising investors to safeguard their shares from being loaned to short sellers. This strategy could reduce the number of shares available for short selling and increase the cost of borrowing.
While TMTG shares are down 44% in the last month, the stock is up 17% in the last five trading days, which comes from the headline news on short selling and as shares remain volatile during Trump's hush money trial.
DJT Price Action: Trump Media & Technology Group shares are up 11.3% to $42.86 versus a 52-week trading range of $12.40 to $79.38, which includes time as Digital World Acquisition. Shares are up 208% over the last year.
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