In a recent legal battle, Donald Trump’s lawyers argued in front of the Supreme Court for his “presidential immunity” from criminal prosecution for official acts. Simultaneously, Trump Media and Technology Group (TMTG), led by CEO Devin Nunes, has been facing a significant stock price decline since its initial public offering. Shares of DJT plunged from $57.99 to $22.84 in a matter of weeks, prompting Nunes to blame Wall Street short sellers for allegedly engaging in “potential market manipulation.” TMTG’s attempt to combat short selling and protect retail shareholders has been met with skepticism from securities lawyers, who believe the company cannot prevent short selling actions.
Investors engage in legal short selling practices when they believe a stock’s price will decrease. TMTG has accused some short sellers of engaging in naked shorting, a practice where shares are sold without first securing them. While naked short selling can be illegal, it is allowed in certain circumstances, such as contributing to market liquidity. TMTG’s presence on Nasdaq’s Reg SHO threshold list, which tracks stocks with higher than normal levels of failures to deliver, has been cited as an indication of illegal activity. However, experts caution that being on the list does not automatically imply misconduct, and TMTG has not filed any lawsuits related to short selling.
Despite TMTG’s public campaign against short sellers and allegations of market manipulation, the stock price roller coaster may not solely be attributed to short selling practices. Data on DJT’s short selling volume suggests that the stock’s decline was not solely due to illegal short selling actions. TMTG, which boasts a strong business foundation with $200 million in the bank and no debt, disagrees with investors who question the company’s sustainability. With only $4.1 million in revenue and a significant net loss in the previous year, coupled with a small user base compared to established social media platforms, TMTG’s $5.3 billion market valuation has attracted legitimate short sellers who anticipate the stock’s decline.
The controversy surrounding TMTG’s stock price decline has led CEO Devin Nunes to seek Congressional intervention in investigating market manipulation and anomalous trading of DJT shares. While some experts view this as a political strategy to combat short selling, others find it highly inappropriate and unlikely to intimidate sophisticated short sellers. TMTG’s majority shareholder, Trump himself, could potentially impact the stock price by selling additional shares after the lock-in period expires. The allure of investing in Trump as a public figure rather than the company itself may also impact the stock’s performance.
As TMTG’s legal battle and stock performance play out, Forbes and other media outlets targeted by the company’s lawsuit from November 2023 continue to report on the ongoing developments. The outcome of TMTG’s efforts to combat short selling, retain retail investors, and sustain its stock price amidst market challenges remains uncertain. With the future prospects of Trump’s involvement in the company and the impact of short selling on stock performance, TMTG’s journey in the financial market continues to attract public attention and scrutiny.
