Former President Donald Trump’s social media company got off to a hot start on its first day of trading, showcasing a buying frenzy to scoop up shares.
Trump Media & Technology Group shares, trading as DJT on the Nasdaq Composite Index, surged as much as 52 percent in the opening minutes of the March 26 trading session, with millions of shares trading hands.
Activity was so immense that the stock experienced a brief trading halt due to volatility.
DJT shares endured a massive pullback toward the closing bell. At the end of the session, the stock rose $8.04, or 16.10 percent, to $57.99 a share.
At about $58 per share, the company’s market capitalization was close to $7 billion on an undiluted basis. With a majority stake in the company, President Trump’s holdings are valued at approximately $5.5 billion.
In a Truth Social post, President Trump celebrated the stock’s performance.
Beware of Short Selling
Investors considering betting against the stock, also known as short selling, might pay hefty premiums.Nick Battista, the director of Market Intelligence at options trading platform Tasty Live, estimates that it costs around 280 percent annually to borrow shares to short the stock. This is “because of how high the implied volatility is, as well as the low share float,” Mr. Battista told The Epoch Times.
“The cost to speculate to the downside for this stock costs two to three times what it costs to speculate to the upside,” he added.
Citing data from financial analytics firm S3 Partners, Bloomberg reported that TMTG is the most expensive U.S. stock to short, with more than $100 million of short interest. The stock’s enormous gains cost short sellers around $61 million on paper.
Trump’s History in the Stock Market
This is the first time that a Trump company went public since 1995. Nearly 30 years ago, Trump Hotels and Casino Resorts went public using the same DJT ticker.In the initial public offering (IPO), the company raised $140 million by selling 10 million shares at $14. A year later, the stock hit $35—and then plunged because the company acquired another casino for more than it was worth. The New Jersey-based company continually bled cash in the following years and eventually filed for Chapter 11 bankruptcy protection.
It was then delisted from the New York Stock Exchange (NYSE).
During a press conference on March 25, former President Trump told reporters that he chose not to list TMTG on the New York Stock Exchange, claiming that the exchange “badly” wanted the company.
Short-Term Spike or New Media Giant?
After Mr. Trump’s social media firm merged with blank-check company Digital World Acquisition Corp. (DWAC) last week, his net worth spiked by more than $4 billion, to about $6.53 billion. This helped former President Trump join the Bloomberg Billionaires Index, ranking 422. He is ahead of Hong Kong billionaire Geoffrey Kwok and behind Russian billionaire Alexey Kuzmichev.The exceptional debut performance likely bolstered the presumptive Republican nominee’s net worth.
Shareholders voted to approve a merger between DWAC and TMTG. The special acquisition firm had attempted to buy the ex-president’s company in October 2021, but it faced a series of legal hurdles, including challenges from the Department of Justice and the Securities and Exchange Commission (SEC).
While former President Trump is poised for a massive windfall, he cannot touch his shares for six months as part of a lockup provision. However, the new board of directors, which may include his son and a couple of administration officials, could vote to permit him to liquidate his shares.
In an SEC filing, DWAC noted that President Trump could divest his stake in the company depending on his White House bid.
Meanwhile, former President Trump’s investment value could diminish when he can access his holdings because of the mixed financials. The social media platform reported a $10.6 million operating loss in the first nine months of 2023. However, in this same span, revenues climbed 1,326 percent year over year, to $3.38 million, owing to increased users and a new advertising program.
Still, like other tech startups, Truth Social is expected to face operating losses “for the foreseeable future.”
With the stock popping, some wonder if this is a sign that a new media giant is forming.
“Could Trump Media become the next major media company, or is this just a short-term spike?” asked The Kobeissi Letter, a popular financial newsletter on X.
