Shares of Trump Media & Technology Group experienced a remarkable surge, erasing losses incurred earlier in the week, following the company’s guidance to shareholders on preventing their shares from being lent to short sellers. Trump Media shares concluded the trading day with a robust 26% increase, reaching $33.19, after initially opening in negative territory. This upward momentum built upon a 16% gain observed on the preceding Wednesday.
Despite the recent uptick, the stock has exhibited significant volatility, remaining below its previous highs of approximately $66 following its merger with a special-purpose acquisition company in late March. From a conventional valuation standpoint, Trump Media appears substantially overvalued, with reported revenue of $4.1 million in 2023 and a substantial net loss of $58.2 million. Moreover, its Truth Social platform, while garnering attention, occupies a niche position in the social media landscape compared to industry giants like Reddit or Meta Platforms’ Facebook.
However, the limited availability of shares for trading and borrowing has rendered Trump Media a challenging target for short sellers. Moreover, the potential for a surge in buying activity from supporters of former President Donald Trump, who holds the majority ownership stake in the company, presents an additional risk for those betting against the stock’s price decline.
In an apparent effort to further impede short sellers, Trump Media recently offered guidance to shareholders on preventing their shares from being loaned out. An update to the company’s website on Wednesday included a section addressing frequently asked questions, notably featuring advice on safeguarding shares from short selling.
The recommended measures included holding DJT shares in a cash account rather than a margin account, opting out of securities lending programs, or transferring shares to the company’s designated transfer agent.
Former President Trump’s stake in the company, valued at approximately $2.6 billion at Thursday’s closing price, remains substantial. Additionally, he stands to receive an additional 36 million earnout shares, contingent on the stock’s performance. To unlock the maximum award, the stock must maintain a volume-weighted average price above specified levels for a set duration following the merger.
While Trump is currently restricted from selling his Trump Media shares until the expiration of a six-month lockup period, he retains the option to seek a waiver from the company’s board, which includes members of his family and former administration officials.