Trump Media Shares Tips to Protect Against Short Sellers as DJT Stock Declines.

Trump Media Shares Tips to Protect Against Short Sellers as DJT Stock Declines.

Trump Media is actively advising its shareholders on safeguarding their stocks from being lent to short sellers, who speculate on price drops. The company’s recent guidance, shared on its website, coincides with a significant downturn in DJT stock value since its public debut on March 26. Despite elevated fees for shorting trades, interest from short sellers remains high.

While Trump Media’s stock saw a notable surge of over 15% on Wednesday, closing at $26.40, it still marked a substantial 63% decline from its opening price in March. Recent weeks have seen steep declines, with a 20% slump last week and subsequent drops of more than 18% on Monday and over 14% on Tuesday. As of Wednesday, the share price was nearly 46% lower than its April 1 closing price.

These challenges coincide with Trump Media’s disclosure of a $58 million loss for 2023, with minimal revenue of $4.1 million. Former President Donald Trump, holding almost 60% of Trump Media shares, could potentially increase his holdings by 36 million shares if DJT’s price remains above $17 per share, pursuant to an earnout provision in the merger deal.

Despite Trump’s significant stake, both he and Trump Media have witnessed substantial losses in share value since late March. In response to consecutive days of sharp declines, the company updated its website’s FAQ section, specifically addressing methods to prevent shares from being lent for short-selling purposes. This update, detailed in an 8-K filing with the Securities and Exchange Commission, expands upon initial instructions provided earlier in the week.

Trump Media Shares Tips to Protect Against Short Sellers as DJT Stock Declines.
Trump Media Shares Tips to Protect Against Short Sellers as DJT Stock Declines.

Trump Media Educates Shareholders on Preventing Short Selling

Short selling involves borrowing shares of a company’s stock and selling them, hoping for a price drop to repurchase them later at a lower price. Trump Media recently provided detailed instructions to its shareholders on preventing the lending of their shares for short selling.

The recommendations include holding DJT shares in a cash account rather than a margin account, opting out of securities lending programs, transferring shares to the company’s designated transfer agent, or holding them in a retirement account. Trump Media even provided a form letter for shareholders to send to their brokers, explicitly instructing against lending their shares.

These instructions expand upon simpler guidance initially provided in the FAQ, emphasizing direct communication with brokerage firms to restrict lending. Notably, Trump Media highlights the risks of short selling, including potential exponential losses for short sellers if stock prices rise unexpectedly.

Brokerage firms often lend shares to experienced investors for short sales, presenting an alternative revenue source. However, Trump Media cautions that while brokerage firms and institutional investors may profit from short selling, retail investors may not benefit.

Although only a small fraction of DJT shares were available for shorting, experts suggest that any available shares are quickly targeted by short sellers. This underscores the ongoing interest in shorting DJT stock, despite limited availability.

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