Donald Trump Is Winning His Stock Market Battle Against Short Sellers
Donald Trump speaks to the media as he arrives at his trial for allegedly covering up hush money payments at Manhattan Criminal Court on May 2, 2024 in New York City. Trump’s social media platform’s stock is appearing to weather financial storms.
Former President Donald Trump’s social media company appears to be weathering storms on the stock market, with the stock price remaining steady despite concerns that short sellers would devalue it.
The price of shares in Trump Media & Technology Group (TMTG), which runs the Truth Social platform as its primary asset, has remained higher than lows it reached in April after the company made an effort to stop short selling, a practice that involves borrowing a stock whose price one thinks is going to fall, selling it on the open market, then buying the same stock back later for a cheaper price.
Trump holds almost 60 percent of TMTG. When shareholders of Digital World Acquisition Corp., an existing shell company, agreed to merge with TMTG earlier this year—clearing the way for the former president’s company to go public—its stock value declined after an initial boost.
When the merged group debuted on the stock market on March 26, under the ticker DJT, shares initially surged above $78, closing its first day of trading at $57.99 and giving the company a valuation of $11 billion. The value of each share in the merged group reached $71.90 on March 27, before its profit and loss figures were released.
Then, the company’s share value declined. On April 17, Google Finance data showed the value of each share at $22.84. That was the lowest the share price had been since January 16, exactly three months earlier, when it was $22.35, meaning the share price was a little more than before it merged with Trump’s Truth Social.
On April 15, Trump filed documents with the Securities and Exchange Commission (SEC) meaning that, pending the SEC’s approval, some investors will be able to sell their shares, with one analyst suggesting people sell their stakes in the company.
In an apparent effort to avoid this, on April 29, TMTG issued a press release highlighting steps shareholders could take to prevent brokerage firms lending their shares for the purpose of short selling. The release also included a sample email shareholders could send to brokers to opt-out of securities lending programs.
Company CEO Devin Nunes, a former Republican congressman from California, also sent a letter to stock market index Nasdaq’s chief, Adena Friedman, raising concerns about short selling.
“DJT appears on Nasdaq’s ‘Reg SHO threshold list,’ which is indicative of unlawful trading activity,” the letter, published in an SEC filing on Friday, said. “This is particularly troubling given that ‘naked’ short selling often entails sophisticated market participants profiting at the expense of retail investors.”
Naked shorting is a form of investing in which shares being bet against are never secured or borrowed. It is banned because it can artificially distort market supply and incite volatility.
Since then, the value of the shares increased somewhat and, according to April 29 Google Finance data, was up to $41.54 a share.
On May 3, the latest available Google Finance data shows it is $48.68 a share. It has been a week since the stock was worth less than $45, showing the company’s approach appears to be working.
However, Todd Landman, a professor of political science at the School of Politics and International Relations at the University of Nottingham in the U.K., said the stock was still “volatile.”
“The stock value remains relatively volatile with its surge to USD $66.22 at the end of March, after which it dropped to USD $22.84, but has seen a steady climb since 16 April back up to USD $48.68 by 2 May,” he said. “It has thus not recovered to the value in late March and there remains the key question as to whether Mr. Trump will sell his shares in September, which could affect the share price.”
A TMTG spokesperson told Newsweek: “We will take whatever actions are necessary to prevent our retail investors from being exploited.”
Start your unlimited Newsweek trial