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The share price of Trump media closed trading up more than 12% on Monday, continuing the stunning rise that began in mid-April.
The DJT ticker ended the day at $46.69 per share, up $5.15, up 12.4%.
Trump Media owns the Truth Social app, which is frequently used by the company’s majority shareholder, former President Donald Trump, who is also the presumptive Republican presidential nominee this year.
“TRUTH SOCIAL IS THE TRUE VOICE OF AMERICA!!!” Trump wrote in a post on the website earlier Monday.
The company began public trading on March 26 at over $70 per share. Over the next few weeks, share prices plummeted, reaching a low closing price of $22.80 on April 16.
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DJT share price
Since then, the price of Trump Media shares has more than doubled, increasing both the company’s market capitalization and the ex-president’s stake by billions of dollars.
The increases occurred without any significant news of an improvement in the company’s results.
But Jay Ritter, an economics professor at the University of Florida, said the recent rise in Trump Media’s stock price could be the short-term result of the company’s recent statements and regulatory filings aimed at short sellers.
“Over the last week or so, the company has informed its shareholders about how it may make it more difficult for short sellers to lend their shares, and it is possible that the number of shares available for short selling has decreased, thereby increasing the number of shares [cost] “The target interest rate for short sales should increase,” said Ritter, an expert in IPOs.
“And it’s possible that some of them [short sellers] I shortened that.”
Ritter also said a “short squeeze” could occur, in which short sellers who bet that the stock price will fall are forced to buy back shares of Trump Media to replace the shares they borrowed to short sell have. Such buybacks can drive up the stock price, which in turn increases pressure on short sellers to buy shares to cover their positions, which also leads to price increases.
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Earlier on Monday, Trump Media issued a press release that essentially underscored previously released information to shareholders and advised them how to avoid having their shares loaned out so that short sellers could bet on price declines.
Last week, the company called on Republican committee chairmen in the House of Representatives to investigate what it said was possible manipulation of Trump Media’s stock price by short sellers.
Ritter said that filing, which has not yet been acted upon, could also help drive up the stock price.
But regardless of how much the attack on short sellers impacts the price, Ritter said Trump Media remains a “meme stock” whose market valuation has little to no connection to the underlying business and future business prospects.
Trump Media has more than $200 million in cash, but its social media business posted losses of $58 million last year on revenue of just $4.1 million.
But the company’s effective face is Donald Trump, whose political supporters are among the small shareholders who drive up the share price.
“With these meme stocks, it’s really difficult to predict what’s going to happen on a daily or weekly basis,” Ritter said.
“Whether we’re looking at $32 a share a week ago or $46 now, we’re arguing whether the stock is overvalued by 1,000% or 2,000%,” he said.
Ritter pointed out that Trump Media’s market capitalization, taking into account the 36 million additional shares recently granted to Trump because the stock price remained above $17.50, is about $8 billion.
“A company with less than $5 million in annual revenue that is losing a lot of money and has no business plans that will generate much growth,” Ritter said. “The company may be worth a few hundred million dollars, but $8 billion seems to be on the order of 2,000% of what it should be worth by traditional standards,” he said.
Ritter expects Trump Media’s stock price to eventually fall into the low single digits.
If meme stocks become “fantastically overvalued,” he said, “you can easily predict with a high degree of certainty that the long-term returns are going to be pretty poor.”
This is developing news. Check back for updates.
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2024-04-29 21:00:12
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