Trump Media & Technology Group
was edging higher Friday after a surge the previous day. Despite the gains, the company’s chief executive has claimed the stock could be the target of market manipulation.
shares were up 2.0% at $34.13 in early trading, after closing up 26% on Thursday. The stock has been highly volatile and despite recent gains, it remains well below the highs of around $66 reached after its merger with a special-purpose acquisition company in late March.
By normal metrics, the company is significantly overvalued. Trump Media’s revenue in 2023 was $4.1 million, and the company posted a net loss of $58.2 million. Its Truth Social platform is a niche player in social media compared with sites like
or
’ Facebook.
That would normally make the company a tempting target for short sellers, who aim to make money from a fall in a stock price by borrowing shares and selling them, with the hopes of buying them back later at a lower price. It can be lucrative if the short seller correctly predicts a drop, but is risky due to the uncapped losses faced if the stock climbs.
The limited amount of stock available for trading and its volatile swings make Trump Media a difficult proposition for bearish bets.
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Still, Trump Media has taken aim at alleged short selling, advising its stockholders on how to avoid their shares being lent out. Its CEO Devin Nunes has now gone a step further by claiming that the stock could be the target of ‘naked’ short selling – the illagal practice of short selling without actually borrowing the shares.
In a letter to the chair of the Nasdaq Stock Exchange dated Thursday, Trump Media CEO Devin Nunes alleged that data on the stock were “indicative of unlawful trading activity” and pushed for the exchange to take steps for the disclosure of short positions.
Nunes didn’t provide any specific evidence in his letter that Trump Media stock was being manipulated.
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“Data made available to us indicate that just four market participants have been responsible for over 60% of the extraordinary volume of DJT shares traded: Citadel Securities, VIRTU Americas, G1 Execution Services, and Jane Street Capital,” Nunes wrote in the letter.
The four companies named in the letter all act as market makers which handle a large proportion of trading orders, especially those made via retail brokers, which is likely to be common for Trump Media due to its popularity with individual investors.
None of the four market makers named in the letter immediately responded to requests for comment from Barron’s early Friday.
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Former U.S. President Doanld Trump’s stake in the company was valued at around $2.6 billion at Thursday’s closing price. He is still in line to receive an additional 36 million earnout shares in the company, currently worth around $1.19 billion on paper.
The incentive requires the stock’s volume-weighted average price to remain above a series of levels. For Trump to receive the maximum award, the stock must stay above $17.50 in 20 out of any 30 trading days over a three-year period following its merger on March 25. The stock is set to fulfill that requirement as soon as Tuesday next week (April 23), unless the stock falls sharply.
Trump is barred from selling Trump Media shares until a six-month lockup period expires. But he could seek a waiver from the company’s board, which includes one of his sons and several former members of his administration.
Write to Adam Clark at adam.clark@barrons.com
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Read More: DJT Stock Rises. Trump Media CEO Alleges Potential Market Manipulation.
2024-04-19 14:36:00