Trump Media stock soared more than 15% on Wednesday, but its closing price of $26.40 was still 63% lower than its March 26 opening price.
The stock has fallen 20% in the last week alone, plummeted more than 18% on Monday and another 14% on Tuesday.
The stock price on Wednesday was nearly 46% lower than its closing price on April 1, the same day Trump Media announced it would post a $58 million loss in 2023, with revenue for the year of just $4.1 million.
Former President Donald Trump is by far Trump Media's largest shareholder, owning nearly 60% of the company's stock. Additionally, due to an earn-out provision in the merger agreement that took DJT public, his 78.75 million shares could quickly increase by 36 million if DJT's stock price rises above $17 per share in the coming days. .
But since late March, Republican presidential candidate Trump and the Trump media have seen billions of dollars in stock evaporate as stocks tumble.
The company on Wednesday posted an addendum to a list of frequently asked questions on its website following two consecutive days of sharp stock declines and detailed it in an 8-K filing with the Securities and Exchange Commission Thursday morning. .
This supplement adds a significant amount of instruction to what first appeared in the FAQ on Wednesday under the heading “How can I prevent my stock from being loaned out for a short position?” has been done.
Short selling is the act of borrowing a company's stock and immediately selling that stock for a fixed amount. The short seller then waits in hopes that the stock price will decline over a period of time. You can then buy back the same number of shares and pay the lender back the difference in value from when you originally sold the shares. Profit after paying brokerage fees.
“To our long-term shareholders who believe in our company's future, we are taking the following actions to work with our brokerage firms to prevent the lending of our stock for short sales,” Trump Media said in an addendum to its FAQ on Wednesday. I'm emphasizing that.”
Tips include holding DJT stock in a brokerage cash account rather than a margin account, “opting out of securities lending programs,” transferring Trump Media stock to the company's designated transfer agent, and transferring stock to a bank. This includes transferring to Keep it in your retirement account. ”
This step includes a convenient form letter that shareholders can send to their brokers.
“Please accept this written instruction to confirm that the following securities are held in my cash account only and are therefore not available for any stock lending activities,” the letter reads. Masu.
“I hereby expressly opt out of any securities lending program and instruct you not to lend my stock,” the letter reads, before the part where senders can enter the number of shares. .
The detailed instructions were first posted in the FAQ on Wednesday, “To prevent stocks from being lent out for short-seller positions, contact your brokerage firm to set limits on the lending of stocks to short sellers. This is in contrast to the much simpler instructions that just say, “Please.''
A Trump Media spokesperson told CNBC that the company “believes it has a responsibility to provide factual information in response to shareholder questions.”
Short selling is particularly risky because it is significantly different from a “long position” in a stock. In a “long position” in a stock, you can only lose the amount you paid for the stock if the price goes to zero.
In contrast, a short position in a stock could theoretically allow the price to rise without stopping, making the short seller liable for paying exponentially more money to buy back the stock to give back to the lender. .
Trump Media nods to that risk in an updated FAQ, noting that brokerages lend stocks to “sophisticated institutional investors” to conduct short sales. Brokers often claim that short sale customers are experienced investors and have enough cash or collateral on hand to cover losses if the short sale goes awry.
Trump Media also noted that lending stocks to short sellers could be an “alternative source of income” for brokerages.
Trump Media told shareholders, “If stock prices actually fall, securities companies and sophisticated institutional investors will have made a profit, but the ultimate individual investor will not have made a profit.'' “It will be.”
Of the company's more than 136 million shares, only about 5 million DJT shares are available for short selling. And many of the 5 million shares were already locked in short positions earlier this month.
However, Ihor Dusaniowski, managing director of predictive analytics at S3 Partners, told CNBC in early April: “What I hear on the streets is if… [an amount] Even when inventory becomes available, it is out of stock due to inventory shortages. ”
