Market Data 
- Donald Trump’s social media company is trading on the Nasdaq at an eye-popping valuation.
- It should be a real target for short-sellers betting against the stock.
- But that hasn’t happened yet, for a couple of reasons.
Trump Media & Technology Group Corp — Donald Trump’s social media company — is a flashing red light of a stock. Next-to-no revenue; an exceptionally checkered past; completely dependent on the celebrity of a single, erratic man; and, as of Tuesday, worth something north of $9 billion as it starts to trade on the Nasdaq.
In other words: It seems like a perfect candidate for short sellers — investors who bet that a company’s stock price is overvalued and will fall.
And that’s sort of happening. But not that much, for now: More than 3 million shares of Trump Media have been shorted, says short-tracker S3 Partners. That works out to be about 11% of the company’s total outstanding shares.
That’s way higher than the average stock, which has about 5% of its shares shorted. But not nearly as much as the most-shorted stocks. Shorts own 38% of Beyond Meat, for instance. They own 35% of Carvana.
What gives?
S3’s managing director, Ihor Dusaniwsky, offers one explanation: It’s particularly hard to short Trump’s company for technical reasons.
To short a company, you need to borrow the shares from someone else, sell them, and then hope the price of the stock drops before you have to buy the shares back and return them. But Trump’s company started out as a Special Purpose Acquisition Company — a funky corporate structure that was briefly popular during the pandemic stock mania — and it’s hard to borrow against SPACs in general and Trump’s SPAC in particular:
SPAC stock borrowing is usually limited because the usual stock lenders, long shareholders such as mutual funds & ETF providers, do not own SPACs in size and since SPACs are not in most of the larger indexes, passive long shareholders, who are also potential lenders, do not usually hold them. In addition, most retail shareholders are not lenders into the stock loan market, which also limits the number of shares in the lending pool. As a result, any SPAC with a significant amount of short selling will usually have high stock borrow costs and limited stock loan availability. There is extraordinarily little stock borrow available in [Trump Media] to support new short sales and stock borrow rates are extremely high. [Trump Media] is the most expensive stock borrow in the U.S. with short interest over $100 million.
So that’s one reason. The other reason is one that you can figure out without being a shorting expert: Trump Media is the definition of a meme stock — a stock that trades because people on social media think it’s valuable, or funny, or because they want to stick it to The Man or whatever.
And while meme stocks eventually come down to earth, you can get really hosed betting against them in the meantime.
That’s partly because of the nature of shorting in general: Unlike traditional stock investing, where the most you can lose is your initial investment, when you short, your potential losses don’t have any cap. They can keep climbing along with the share price of the company you were hoping would go down.
And it’s partly because retail investors have learned they can, in some cases, work together to pull off a short squeeze and push up the price of a meme stock on their own. Maybe because they want to make money; maybe because they want to stick it to The Man.
That, of course, was the lesson we learned during the GameStop short squeeze of 2021. And if, for some reason, you missed that one, there’s an entire movie about it, which has its problems but is also kind of fun.
So, while I don’t offer investment advice, I am quite confident that Trump Media will not be worth $9 billion or anything close to it by the time this story is over. And, also: I’d be really wary of trying to figure out when the stock will eventually reflect reality.
