Trump Media & Technology Group short sellers are feeling the heat from the company’s recent stock rally and the higher cost of borrowing its stock, analytics firm S3 Partners said.
Shares of the company, which operates former President Donald Trump’s social media business, Truth Social, jumped nearly 7% on Tuesday. Shares have risen for five straight days, although they are down nearly 30% since they began trading March 26 at $70.90.
The advance impacted the returns of short sellers, who made $91.1 million in profits for the month of April, a gain of 50%, said Ihor Dusaniwsky, president of S3 Partners.
Short sellers, who profit from falling stock prices, are still down 68% since trading began in late March, with $94.8 million in losses since the start of the year, he said. -he declares.
Short sellers are “abandoning their positions due to the high cost of financing stock borrowings and the stock’s 75% rise in just over two weeks,” Mr. Dusaniwsky said.
Short sellers who exit a position must repurchase the underlying stock, which puts upward pressure on its shares.
Dusaniwsky said recent price action doesn’t necessarily mean bearish investors are fleeing.
If some unwind their trades, there are “a large number of replacements ready, willing and able to step into the breach and short the stock at these higher levels.”
The higher cost of borrowing the company’s stock adds to their burden, Mr. Dusaniwsky said.
Starting a new short position in Trump Media & Technology Group carries a fee of between 600% and 650%, while existing positions come with a fee of 330%, according to S3 data. Less than 100,000 shares can be borrowed.
“At these levels of stock borrowing, short sellers need the DJT stock price to fall by three-eighths to break even and cover the daily financing costs of stock borrowing” , said Mr. Dusaniwsky.
On April 19, the Trump Media & Technology Group sent a letter to Nasdaq CEO Adena Friedman alerting the exchange to “potential market manipulation” of the stock and suggested that “naked” short selling was to blame.
“Naked” short selling, which is generally illegal in the United States, involves selling stocks without first borrowing them or determining that they can be borrowed, creating the risk that the seller will be unable to deliver the shares. (Reporting by David Randall; Writing by Jamie Freed)
