Former President Donald Trump has undeniably enjoyed a substantial financial gain through his media venture, Trump Media & Technology Group, which trades under his initials, DJT.
The company’s value surged following its public debut on March 26, with its stock soaring by over 16% on the first day. Trump’s ownership stake in the company could potentially exceed $4 billion.
DJT has essentially become a meme stock, attracting widespread investor interest driven by factors beyond the company’s underlying fundamentals.
This phenomenon is largely attributable to Trump’s fame and the fervent support of some backers for his “Make America great again” agenda.
Despite its public listing through a merger with Digital World Acquisition Corp. (DWAC), a special-purpose vehicle that has been trading since 2021, the Trump company has generated minimal revenue and incurred losses amounting to $41 million over the past two years, according to S&P Capital IQ.
However, many investors are skeptical about the prospects of the Trump venture. Ihor Dusaniwsky, managing director at S3 Partners, noted significant conviction among investors that the stock price will experience a substantial decline in the short term.
The short interest in DJT stock, representing bets that the price will decrease rather than increase, currently stands at approximately 11% of outstanding shares, according to S3. Although this figure is relatively high, it’s not unprecedented.
Typically, the average short interest in public companies ranges from 3% to 4%, although short interest can soar to 40% or more if traders anticipate a stock’s downfall.
Despite the elevated short interest, there are limited DJT shares available for executing short trades, making it prohibitively expensive to bet against the stock
Moreover, there is anecdotal evidence suggesting that some investors are speculating on a bubble and aiming to sell before any potential downturn.
Speculative posts on platforms like Reddit’s meme stock channel, WallStreetBets, anticipate a sharp decline in the stock price post-merger.
While short sellers have incurred losses thus far in 2024 due to the stock’s ascent in anticipation of the merger finalization and Trump’s return to the public markets, there are valid concerns about the Trump company’s ability to thrive, potentially leading to adverse outcomes for shareholders.
