More investors are betting Trump social-media stock 'DJT' will drop

By Steve Gelsi

Short selling of shares in Trump Media & Technology Group has risen ahead of the expiration Friday of the lockup on insider sales

More investors have been shorting Trump Media & Technology Group Corp.'s stock in the past 30 days, in a sign of negative sentiment ahead of the lifting of a ban on insider stock sales on Friday.

The increase in short interest in the stock - which gauges the amount of open short positions that have yet to be covered or closed out by a sale - has grown by 40%, or $66 million, to $231 million in the past four weeks, according to research firm S3 Partners.

At this point, about 17.5% of the total number of shares outstanding in the company (DJT), which operates the Truth Social platform, are tied up in short sales - which involves borrowing a stock at one price, expecting it to decline in value, and then selling it on the open market in the expectation that it can be bought back later at a lower price for return to the lender, typically a brokerage firm.

Data: These are the stocks with the highest levels of short interest

Very few shares of the Trump company are now available for short-sale transactions, S3 said. Only 100,000 shares, valued at $1.6 million, have been shorted in the past week due to a limited supply of stock available, the research firm noted.

That could change if insiders such as Donald Trump, the former president and current Republican presidential nominee, decide to sell stakes in the company and increase the number of shares in circulation.

"Not only will the possible new selling activity affect DJT's stock price directly, it will also increase DJT's stock-lending pool which will facilitate increased short selling," S3 analyst Igor Dusaniwsky said in a research note.

The stock's borrow-utilization rate is at 99%, which ranks as the sixth-highest in the Russell 3000 RUA, he said, with less than 200,000 shares of currently available to borrow to support new short positions.

The scarcity of shares available to short has led to a higher cost of borrowing, to a range of 30% to 40%, which is about 100 times the general collateral rate of 0.3% making up 94% of all short interest, S3 said.

Trump said last Friday that he doesn't plan to sell any stock, though he and other insiders had registered shares for potential sale on April 15.

Also read: Donald Trump could sell his 'DJT' stock after saying he won't - but that might spark lawsuits

Trump owns 114.75 million shares, or 57% of the outstanding stock, in Trump Media, while United Atlantic Ventures owns 7.525 million shares and ARC Global Investments II owns 7.4 million shares.

The stock price was down 5.6% on Thursday afternoon at $14.74. It traded at over $40 as recently as mid-July.

-Steve Gelsi

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09-19-24 1540ET

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