Trump's 'DJT' stock rises as CEO 'tries to blame' short sellers for weakness

By Tomi Kilgore

Data shows the volume of short sales was stable as 'DJT' stock was tumbling

Shares of Trump Media & Technology Group Corp. rallied Friday and were headed for a third straight gain after Devin Nunes, chief executive of the parent company of Truth Social, Donald Trump's social-media platform, asked regulators to look into potential illegal selling activity.

The stock (DJT) shot up as much as 12.1% before paring gains to be up 2% in afternoon trading, after soaring 45.3% over the previous two days. The stock's three-day rally has boosted the value of Trump's holding in the company by about $867 million.

The rally comes after the stock closed at a three-month low on Tuesday following a three-week plunge of 65.5%. The selling, which slashed the value of Trump's holding by about $3.4 billion, had accelerated with an 18.4% tumble on Monday, when the first-ever criminal trial of a former U.S. president began.

'Nunes is exactly the type of person Donald Trump would have fired on "The Apprentice." If he worked for Citadel Securities, we would fire him, as ability and integrity are at the center of everything we do.'Citadel Securities

In a filing early Friday, Nunes sent a letter to the Nasdaq exchange regarding "potential market manipulation" of Trump Media's stock by some traders hoping to profit from a selloff.

"As of April 17, 2024, 'DJT' appears on Nasdaq's 'Reg SHO threshold list,' which is indicative of unlawful trading activity," Nunes wrote. "This is particularly troubling given that 'naked' short selling often entails sophisticated market participants profiting at the expense of retail investors."

To effect a "short" sale, which is a bet that the stock price will fall, one must first borrow shares that are already owned before they can be sold. A "naked" short sale refers to the illegal act of selling a share short before it is actually borrowed. Read more about the mechanics behind a short sale.

After the stock started trading under the "DJT" ticker symbol, Ihor Dusaniwsky, managing director of financial analytics at S3 Partners, told MarketWatch that because there weren't many shares available to borrow and demand to short the stock was "extremely high," borrow rates were as high as 500% to 600%.

In Nunes's letter to the Nasdaq, he said that the high borrow fees gave brokers a "significant financial incentive to lend nonexistent shares."

Nunes followed up by saying data made available to him indicated that four market participants - Citadel Securities, VIRTU Americas, G1 Executive Services and Jane Street Capital - have been responsible for more than 60% of the volume of Trump Media shares traded.

"In light of the foregoing, and Nasdaq's obligation and commitment to protect the interests of retail investors, please advise what steps you can take to foster transparency and compliance by ensuring market makers are adhering to Reg SHO, requiring brokers to disclose their 'Net Short' positions, and preventing the lending of shares that do not exist," Nunes wrote.

In response, Citadel Securities said Nunes "tries to blame" the stock's weakness on illegal market activity. "Nunes is exactly the type of person Donald Trump would have fired on 'The Apprentice.' If he worked for Citadel Securities, we would fire him, as ability and integrity are at the center of everything we do," the company said.

As S3's Dusaniwsky has pointed out, when a stock price falls, it's almost always because people who own the stock are selling, and not the fault of short sellers. The following charts show that while Trump Media's stock was falling, the volume of short sales remained relatively stable.

-Tomi Kilgore

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04-19-24 1320ET

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