Trump Media is advising its shareholders on how to prevent their stock from being loaned to short sellers, who are betting that the price of the shares will drop. This move by the company follows a sharp decline in the price of its DJT stock since it began public trading on March 26. The concern about short selling is evident in the measures provided on Trump Media’s website, which aim to protect long-term shareholders who believe in the company’s future.
As Trump Media’s share price dropped by more than 55% from its opening price on March 26, the company disclosed a $58 million loss for 2023 with minimal revenue. Former President Donald Trump is the largest shareholder in Trump Media, owning nearly 60% of its stock. If the share price remains above $17 per share, Trump’s holding of 78.75 million shares could soon increase by 36 million shares due to an earnout provision in the merger deal. However, both Trump and Trump Media have experienced significant losses in market value since late March.
In response to the mounting interest from short sellers, Trump Media has provided detailed instructions to shareholders on how to prevent their shares from being used for short selling. These instructions include holding shares in a cash account, opting out of securities lending programs, transferring shares to designated agents or retirement accounts, and sending a form letter to brokers. The company believes it has a responsibility to provide factual information in response to shareholders’ questions and concerns.
Short selling involves borrowing shares of a company’s stock, selling them, and hoping to buy them back at a lower price to make a profit. This practice is particularly risky as short sellers can incur significant losses if the stock price rises. Trump Media noted that brokerage firms loan shares to sophisticated investors for short sales, and by lending shares, they can earn additional revenue. The company emphasized the potential risks of short selling for retail investors who may not fully understand the complexities involved.
While only about 5 million shares of DJT were available to short out of more than 136 million company shares, short sellers are taking advantage of any available stock. The specific instructions provided by Trump Media to prevent short selling highlight the company’s commitment to protecting its shareholders and ensuring that they are informed about the risks involved. By providing transparency and guidance, Trump Media aims to empower shareholders to make informed decisions about their investments.
Overall, the efforts by Trump Media to address short selling concerns demonstrate the company’s proactive approach to safeguarding shareholder interests. As the share price continues to fluctuate, and short sellers show interest in the stock, Trump Media’s focus on providing clear information and instructions to its shareholders highlights its commitment to transparency and investor protection. The evolving situation will require ongoing monitoring and adjustments to ensure that shareholders are well-informed and protected from potential risks associated with short selling practices.
