Trump Media, the parent company of the much-discussed Truth Social platform spearheaded by former President Donald Trump, has sounded alarms regarding suspected illegal activities that may be contributing to the downward spiral of its share prices. In a formal letter addressed to Nasdaq Inc. on Thursday, Devin Nunes, the CEO of Trump Media, brought attention to what he perceives as potentially illicit “naked” short selling tactics.
Naked short selling, a practice often deemed unlawful, involves the sale of shares without actual ownership or borrowing. Rather than borrowing shares before selling them, as is the case with legitimate short selling, naked short sellers aim to purchase shares at a lower price to cover their initial short position. Nunes’ letter, made public on Friday through a filing with the Securities and Exchange Commission (SEC), expressed deep concern over Trump Media’s inclusion in Nasdaq’s list of securities indicative of suspicious trading activities.
Nunes underscored the troubling nature of such practices, particularly for retail investors who may bear the brunt of the repercussions. He emphasized the potential exploitation of less sophisticated investors by certain market participants seeking to profit at their expense through manipulative trading tactics.
Despite attempts to reach out for comments from Nasdaq and Trump Media, representatives from both entities have yet to respond, leaving the allegations hanging in the air with no immediate resolution.
Trump Media’s journey into the public market has been marked by significant volatility, with its share price plummeting by approximately 50% from its peak on March 26, following its merger with a blank-check acquisition company. While the company boasts a substantial valuation, it faces considerable financial challenges, struggling to generate substantial revenue. Financial experts have issued warnings to potential investors, cautioning against trading Trump Media’s stock due to its lack of fundamental support for its lofty valuation.
Despite the setbacks, Trump Media experienced a modest uptick of around 9.6% in its share price at the close of Friday’s trading session. The company continues to grapple with the complexities of the financial markets while grappling with concerns over potential market manipulation and illicit trading practices.