Equities

Short Selling Costs Skyrocket for DJT Stock Amid Limited Availability

Shorting Trump's DJT stock faces a 500% fee amid limited share availability and significant short interest.

By Barry Stearns

4/3, 14:01 EDT
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Key Takeaway

  • DJT stock's borrowing cost for short selling has skyrocketed to 500-600%, making it financially impractical due to limited share availability.
  • Despite a 14.1% decline since its debut, there's significant short interest in TMTG, with 4.93 million shares or 12.6% of the public float.
  • Short sellers have incurred substantial losses, with $126 million lost in March overshadowing $42 million in April profits, risking a "short squeeze."

Market Dynamics

Shares of Trump Media and Technology Group Corp. (TMTG) have experienced a decline since their trading debut last week under the ticker "DJT," previously known as "DWAC" before the company's merger with a special-purpose acquisition company. The stock, which initially soared by 58.9% to an intraday high of $79.38 on March 26, has since seen a reduction of 14.1% in its value. This fluctuation comes amidst a backdrop of high expectations and significant market attention towards the company's performance and future prospects.

Short Selling Constraints

The process of short selling, which involves borrowing shares to sell with the hope of buying them back at a lower price, faces significant hurdles for DJT. According to Ihor Dusaniwsky, managing director of financial analytics at S3 Partners, the availability of DJT shares for borrowing is extremely limited, with less than 50,000 shares available. This scarcity has driven the cost to borrow shares for short selling to exorbitant levels, with rates ranging between 500% to 600%. Consequently, the financial viability of short selling DJT is highly questionable, given the steep costs involved.

Investor Sentiment and Short Interest

Despite the challenges associated with short selling DJT, there remains a notable short interest in the stock. As of the latest data, short interest in DJT and its predecessor ticker DWAC stands at 4.93 million shares, representing 12.6% of the public float. However, short sellers have faced significant losses, with an estimated $42 million in mark-to-market profits in April being overshadowed by approximately $126 million in losses during March. Dusaniwsky highlights the potential for a "short squeeze," a scenario where rising prices force short sellers to cover their positions, further driving up the stock price.

Street Views

  • Ihor Dusaniwsky, S3 Partners (Neutral on Trump Media and Technology Group Corp.):

    "There is very little stock available to borrow to support new short selling — less than 50,000 shares — and with demand to short this stock extremely high, we are seeing stock-borrow rates at 500% to 600% fee levels." "Given the cost and the fact that there are no sizable stock borrows available to support new short sales...there can be no new selling pressure brought on by short sellers."