Trump Media & Technology Group Corp. (NASDAQ: $DJT) is a media and technology company that went public on March 26, 2024. The company is majority-owned by Donald Trump and is behind the social media network Truth Social.
Since its launch on the public markets, the stock has suffered several setbacks after an initial rally. In the last trading session, the stock sank again, continuing a trend of losses.
Trump Media (DJT) Sinks Again
Last week, on Monday, April 2, Trump Media sank 21% after an SEC filing. The SEC filing revealed that the company faced serious risks, including a net loss of about $60 million against sales of just $4 million as of December 31, 2023.
Additionally, the filing stated that the company expected to “continue to incur operating losses and negative cash flows from operating activities for the foreseeable future, as it works to expand its user base, attracting more platform partners and advertisers.”
On Monday, April 8, 2024, the losses continued piling on, with the stock sinking 8.43% at the close of trading at $37.17 per share. At one point, during the late-day session, the stock was down over 10%. The stock is currently down 53.17% from its peak of $79.38.
The Cost of Shorting Trump Media
According to market analysis firm S3 Partners, the short interest on Trump Media shares is around 12% of free float shares, or around 4.75 million shares.
While the stock has nosedived since going public, it may have nothing to do with short sellers. Ihor Dusaniwsky of S3 Partners stated that the drop could be attributed to former bulls who were offloading their stake in the company.
S3 Partners noted in its report that DJT shares were the most expensive to short in US markets. Investors who wish to short DJT would pay close to 600% of the price of the shares as of Wednesday, April 3, 2024. In contrast, it costs around 0.71% on average to finance a short position.
According to Dusaniwsky, the main reason for this is that demand outstripped supply, with less than 50,000 shares available.
At the current rates, Trump Media shares would have to drop over $30 to break even after a month, as of Wednesday’s closing price. Dusaniwsky added, “People are looking for an extraordinary price drop in an extremely short period of time.”
However, this could place short sellers in a tough spot as most DJT holders are individual traders whose purchase of the stock is based on their support for Trump. Consequently, they are not willing to sell.
Dusaniwsky also noted that short-selling the shares came with a recall risk. Such a situation arises when brokers need shares from short sellers to sell for customers who are long and originally bought them on margin.
The analyst noted that short sellers had made around $42 million in April during the first two trading session but incurred losses of around $126 million in March.
Is DJT Stock a Buy?
Many analysts have described Trump Media (DJT) as a meme stock. While it is possible to profit from meme stocks, there is also a high degree of price volatility. Consequently, for investors with a sizable risk appetite, DJT shares could potentially be a lucrative investment.
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