Investigation called for as stock volatility continues
- Trump Media CEO accuses short sellers of manipulating stock
- Company calls for investigation into trading activity
- Allegations made against four market participants
- Stock volatility not supported by short sales data
- Retail investors advised on how to protect their shares
Trump Media & Technology Group Corp.’s stock was up 8% Wednesday, as the parent of former President Trump’s Truth Social platform delivered its latest attack on what it’s calling the “potential manipulation” of its stock by short sellers. In a regulatory filing, the company said Chief Executive Devin Nunes had written to congressional leaders asking them to open an investigation into “anomalous” trading of the stock to determine whether laws — including RICO statues and tax evasion laws — have been broken. RICO, or the Racketeer Influenced and Corrupt Organizations Act, is a 1970 law that was famously used to tackle organized-crime groups in the U.S. The letter comes after Trump Media sent a similar missive last Friday to Nasdaq Chief Executive Adena Friedman, in which it said data made available to the company found that just four market participants had been responsible for more than 60% of the volume of “DJT” shares DJT, +11.49% traded. “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.” Most of DJT’s shares are owned by retail investors. Trump Media’s stock has been volatile since it hit the public market in late March following a merger with a special-purpose acquisition corporation, or SPAC. The stock rallied 7.8% in afternoon trading Wednesday, reversing an earlier intraday loss of as much as 6.1%. It has soared 53.7% since closing at a three-month low of $22.84 on April 16, but has plunged 47% since it closed at a post-merger high of $66.22 on March 27. Yet according to market data, the allegations that short sellers are to blame for the volatility does not hold up, given the tiny volumes of short sales that were happening during the peak selloff of the stock. Borrow supply is extremely limited with little to no availability, with rates trading at more than a 300% fee, according to financial-analytics firm S3 Partners. As the following charts show, while Trump Media’s stock was falling, the volume of short sales remained relatively stable. Naked short sellers typically sell shares they don’t own and after a few days simply book them as FTDs or hide them as long sales. Investors who buy the shares from them are unaware that they are buying fake shares. The maneuver can add far more shares of a stock to the market than there should be and create volatility in its price. Trump Media on Tuesday sent advice to retail investors on how to stop brokers from lending out their shares. Brokers lend the shares from margin accounts, so one way a small investor can stop the practice is by placing their shares in a cash account instead, Trump Media said in the statement. They can also opt out of any securities-lending programs and can move their shares to a direct-registration account at the company’s transfer agent, Odyssey Transfer & Trust Co., Trump Media added. The statement included a sample letter for retail investors to use to direct their broker not to allow their shares to be made available for lending.
Factuality Level: 2
Factuality Justification: The article contains a mix of relevant and irrelevant information, including unnecessary background details about short selling and naked short selling. It also includes biased statements and opinions presented as facts, such as the criticism of Chief Executive Devin Nunes by Citadel Securities. The article lacks depth in analyzing the situation and fails to provide a balanced view of the events.
Noise Level: 3
Noise Justification: The article provides detailed information about Trump Media & Technology Group Corp.’s stock, including allegations of manipulation by short sellers, regulatory filings, and responses from involved parties. It also explains the concepts of short selling and naked short selling. However, the article contains some repetitive information and does not provide a balanced view by including perspectives from all parties involved.
Financial Relevance: Yes
Financial Markets Impacted: The article discusses the stock price of Trump Media & Technology Group Corp., which is the parent company of former President Trump’s Truth Social platform. It mentions the potential manipulation of the stock by short sellers and the request for an investigation into the trading activity. The article also mentions market participants such as Citadel Securities, VIRTU Americas, G1 Execution Services, and Jane Street Capital.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article primarily focuses on the stock price and allegations of manipulation by short sellers. There is no mention of any extreme events or their impact.
Public Companies: Trump Media & Technology Group Corp. (not available)
Key People: Devin Nunes (Chief Executive of Trump Media & Technology Group Corp.), Adena Friedman (Nasdaq Chief Executive)
Reported publicly:
www.marketwatch.com 
