Trump Media shares surge amid speculation and investor tactics

An inquiry has been called for following observations on the behavior of its stock price

Trump Media shares surge amid speculation and investor tactics

Shares of Trump Media, the company behind the social media platform Truth Social, closed up more than 12% on Monday, continuing a volatile trading pattern that has captured the attention of investors and analysts alike.

The stock, listed under the ticker DJT, ended the day at $46.69, a climb of $5.15, or 12.4%. According to a CNBC report, this notable increase is part of a broader upward trend that began in mid-April, following a significant drop in value earlier in the month.

Trump Media, predominantly utilized by its majority shareholder and former President Donald Trump, launched its public trading on March 26 with an initial price above $70 per share. However, the price plummeted over the subsequent weeks, hitting a low of $22.80 on April 16. Since that nadir, the company’s stock has more than doubled.

The recent rise in stock value occurs despite no substantial improvements in the company’s financial fundamentals. Trump Media reported substantial losses last year, with a net loss of $58 million against revenues of merely $4.1 million. The company holds over $200 million in cash reserves.

Did short sellers drive the stock price?

Jay Ritter, a business professor at the University of Florida and an initial public offerings expert, attributed the recent stock price movements partially to strategic actions taken by Trump Media aimed at short sellers. Recently, the company has advised its shareholders on how to prevent their shares from being borrowed by short sellers, who bet on declines in stock prices.

“It is possible that the number of shares available to short has decreased, increasing the [cost] borrowing rate for short selling,” Ritter explained. He also suggested that a short squeeze might be occurring—where short sellers are compelled to buy shares to cover their positions, further driving up the stock price.

Trump Media has called on Republican committee chairs in the House of Representatives last week to investigate alleged manipulations of its stock price by short sellers, a request that remains pending.

Despite these dynamics, Ritter warns that Trump Media qualifies as a “meme stock,” a term used to describe stocks whose market prices are heavily influenced by social media and other external, non-financial factors rather than the company’s economic fundamentals.

“Whether we’re dealing with a price of $32 per share a week ago, or $46 now, we’re quibbling about whether the stock is overvalued by 1,000% or 2,000%,” Ritter said. He predicted that the company’s shares are likely to plummet to much lower levels in the long term.