Published on: October 28, 2024, 09:07h.
Last updated on: October 28, 2024, 09:07h.
Shares of Trump Media & Technology Group (NASDAQ: DJT), the social media company of the former president, are surging in response to positive news, causing trouble for short sellers.
With a significant gain of 21.59% today and a surge of 221% since the beginning of the month, traders with bearish positions in Trump Media & Technology are in a tough spot. Short interest in the company is at 13.18 million shares, or 17.54% of the freely floating shares, resulting in a short ratio of 0.73 based on Finviz data.
The stock has increased over 51% in the past week and more than 170% since the start of the year, potentially making short sellers nervous. Two key factors exacerbating the situation are the high cost of borrowing shares of Trump Media & Technology and the need to buy back the stock when short sales are covered, potentially fueling a rally further.
‘Mother of All Short Squeezes’ Could Be Coming
With short sellers potentially facing a massive short squeeze in Trump Media stock, sources suggest that a significant rally could be on the horizon. Based on the 17.54% short interest, over $560 million of the stock is sold short.
Sources told The New York Post’s Charles Gasparino that the “mother of all short squeezes” could be looming for Trump Media shares, potentially fanning the flames of what’s already been an epic near-term rally. Based on the aforementioned short interest of 17.54%, that implies more than $560 million of the stock is sold short.
Insiders, including the former president, own 57.3% of Trump Media and have not sold any stock yet, making it challenging for short sellers to find the required selling pressure to exit their positions profitably.
Trump Media & Technology Group went public through a reverse merger with a SPAC and started trading independently in March, similar to many gaming stocks.
Fundamentals Favor Trump Media Shorts
From a fundamental perspective, short sellers targeting Trump Media were right in their approach. The company is not profitable, has slow revenue growth, and an overvalued market capitalization of $7.48 billion.
The stock’s volatility is evident, with significant fluctuations in value over short periods. Despite being influenced by polling data and political betting markets, short covering has been minimal, indicating that some traders are holding onto bearish bets ahead of Election Day on Nov. 5.