Shorting Trump Media stock right now is an expensive and risky endeavor due to its high borrowing costs. The annual financing costs for borrowing shares of Trump Media to sell short ranged from 750% to 900% of the stock price. Short sellers needed the share price to drop significantly just to break even on their trades. Despite these steep costs, some are still interested in shorting Trump Media, motivated by a belief that the share price will plummet from its current levels.
Short sellers are hoping for an extraordinary price drop in a short period of time to make their trades profitable. The high costs associated with shorting Trump Media make it a challenging and rare opportunity in the stock market. The short interest in Trump Media was around $255 million as of Wednesday, with many short positions being established in Digital World Acquisition Corp., which merged with Trump’s social media company to form Trump Media. Short sellers are facing difficulties due to limited shares available to borrow for shorting.
Despite the challenges and risks, many investors are interested in shorting Trump Media due to its high valuation relative to its revenue. The share price of Trump Media surged upon going public but later dropped significantly after the company reported losses. Those shorting Trump Media believe the stock is overvalued and are hoping for a substantial price drop to profit from their trades. Short sellers are aiming for a 20-plus percent return on their trades, which would require a significant decrease in the share price.
The difficulty in borrowing shares for shorting Trump Media has created a squeeze on short sellers, with limited shares available and high financing costs. Out of the approximately 5 million shares available to short, the vast majority have already been borrowed, driving up costs even further. Short sellers find themselves in a difficult position due to the reluctance of Trump Media shareholders to sell their shares and the limited availability of shares to borrow. This situation has created a risky environment for those shorting Trump Media, with potential for significant losses if the share price does not drop as anticipated.
Overall, shorting Trump Media stock is an expensive and challenging endeavor at the moment due to high borrowing costs and limited availability of shares. However, some investors are still interested in taking on this risk in the hopes of profiting from a potential decline in the share price. The situation surrounding Trump Media and its short interest highlights the complexities and risks associated with short selling in the stock market.
