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Trump Media is emphasizing it shareholder How to prevent their shares from being loaned out to short sellers – short sellers who are betting that the stock price will fall.
Tips to prevent short selling posted on Trump Media website Wednesday website Its DJT stock has fallen sharply in price since it began trading publicly on March 26, and short sellers have taken strong interest in the owner of the Truth Social app, despite the relatively high financing fees for such a deal.
Trump Media’s stock price rose sharply on Wednesday, up more than 15%, closing at $26.40, still 63% lower than the opening price on March 26.
The stock fell 20% last week alone, plunging more than 18% on Monday and more than 14% on Tuesday.
Shares on Wednesday were nearly 46% lower than their closing price on April 1, the same day Trump Media disclosed a loss of $58 million in 2023, with revenue of just $4.1 million for the year.
Former President Trump is by far the largest shareholder of Trump Media, owning nearly 60% of its shares. If DJT’s stock price stays above $17 a share in the coming days due to the take-out clause in the company’s take-home merger deal, his holdings of 78.75 million shares will soon increase by 36 million shares.
But since the end of March, billions of dollars have been wiped off the stock prices of Republican presidential candidate Trump and Trump Media.
On Wednesday, after two days of sharp price declines, the company added an addition to its list of frequently asked questions to its website and detailed the list in an 8-K filing with the U.S. Securities and Exchange Commission on Thursday morning. Securities and Exchange Commission.
The supplement provides shareholders with detailed instructions on: “How do I prevent my shares from being loaned out for short selling?”
Short selling is the act of borrowing shares of a company and then quickly selling those shares for a set amount. The short sellers then wait, hoping that the stock price will fall over a period of time so that they can buy back the same number of shares and return them to the lender, pocketing the difference between the price they originally sold the shares for after paying the broker’s fee profit.
“For long-term shareholders who believe in the company’s future, the company emphasizes the following actions you can take with your brokerage firm to prevent your shares from being loaned out for short selling,” Trump Media said in a supplement to its FAQs on Wednesday.
These tips include holding DJT shares in a cash account at a brokerage firm rather than a margin account, “opting out of any securities lending program,” transferring Trump Media shares to the company’s designated transfer agent, and transferring shares to a bank and ” Keep them in your retirement account.”
These instructions include a useful form letter that shareholders can send to their brokers.
“Please accept this written instruction to ensure that the securities below are held in my cash account only and are therefore not available for any stock lending activities,” the letter read.
“I hereby expressly opt out of any securities lending program and instruct you not to loan any of my shares,” the letter reads, before the sender can fill out the portion of their stock count.
A Trump media spokesman did not immediately respond to a request for comment on the new directives to prevent short selling.
Short selling is particularly risky because it is significantly different from a “long position” in a stock, where a person can only lose the amount they paid for the stock if the price fell to zero.
In contrast, a short position in a stock could theoretically see its price continually rise, leaving the short seller responsible for paying multiple times the amount of money to buy back the stock back to the lender.
Trump Media acknowledged this risk in an updated FAQ, noting that brokerage firms “lend stocks to sophisticated institutional investors” for short selling. Brokers often insist that the clients they engage in short sales transactions with are sophisticated investors and have enough cash or collateral on hand to ensure they can recoup their losses if the short sale fails.
Trump Media also pointed out that lending stocks to short sellers can earn “another source of revenue” for brokerages.
Trump Media told its shareholders: “If stock prices do fall, then brokerage firms and sophisticated institutional investors will profit, but ultimately retail investors will not.”
Of the more than 136 million shares of the company, only about 5 million shares of DJT are available for shorting. Most of the 5 million shares had been locked into short positions earlier this month.
But Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, told CNBC in early April, “What I’m hearing on Wall Street is that if (a certain amount of) stock is available, shorts will take it. It’s pulled down.
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