A group of amateur Wall Street investors has been betting against the stock price of Donald Trump’s social media platform, Truth Social, leading to tens of millions of dollars in profits. These investors are using options and other trading tools to take advantage of the company’s poor financial performance, rather than personal feelings about the former president. The stock price has dropped significantly since its initial public offering, and investors using puts and short selling have seen paper profits of at least $200 million.
Despite the profits, amateur traders are cautious about declaring victory due to the stock’s volatility. There have been moments of uncertainty, such as when the stock price surged nearly 40% in just two days. Investors who are betting against the stock are motivated by both financial gain and the satisfaction of potentially reducing the value of Trump’s stake in the company. Trump still holds a 65% stake in the company, valued at $4 billion, despite the efforts of short sellers.
The financial report of Trump Media & Technology reveals significant losses and minimal revenue, leading to doubts about the company’s future prospects. Short sellers typically conduct extensive research before betting against a stock, but in this case, the company’s financial woes are readily apparent in its financial statements. The stock fee is exorbitant, making it challenging for short sellers to profit from their bets against the company.
The risk of a short squeeze, caused by a sharp rise in the stock price, poses a threat to short sellers who may be forced to return borrowed shares at a loss. Additionally, the lock-up agreements preventing Trump and other executives from selling their shares until September could lead to increased volatility in the stock price. Some traders believe that once the lock-up period ends, there will be a significant sell-off, further driving down the stock price.
In light of the complexities and risks involved in betting against Trump’s stock, some traders are offsetting their put bets with calls to hedge their positions. The use of derivatives allows traders to potentially profit from both a decrease and an increase in the stock price. For those who are not interested in the intricacies of stock trading, offshore betting sites are offering wagers on the outcome of the 2024 election, with some even favoring President Joe Biden. Overall, the unconventional trading activity surrounding Trump’s social media company reflects a unique blend of financial speculation and political sentiment.
