The Trump Media anti-short selling campaign has inadvertently benefited short sellers by causing false claims of victory and creating a sense of success in the stock market. Short sellers had previously covered their shorts in the $20s and are now taking advantage of the situation to re-enter the market as the stock price rises.
Despite Barron’s suggesting that Trump Media’s short selling campaign may be effective, the campaign and subsequent rise in stock price have exposed investors to the reality that both long buyers and short sellers are necessary for proper pricing in the market. Blaming short sellers for the downfall of weak stocks is futile, as short sellers serve as a check on overoptimism and overvaluations.
While the campaign may have initially driven off some short sellers, they have since returned due to the overpriced nature of Trump Media stock. Several factors, including weak fundamentals, an increase in common shares, and the registering of 204M new shares, point to a high risk of another plummet in the stock price in the near future.
Moreover, Trump Media faces additional challenges such as investor-lenders converting debt into common stock, potential lawsuits from supporters of Digital World Acquisition Company, and significant shareholdings acquired below the IPO price. This combination of factors suggests that the $10 price level may only serve as a temporary support barrier for the company.
In order to meet shareholders’ expectations, Trump Media must grow rapidly, which poses a significant challenge given the company’s current situation. The Wall Street Journal highlights concerns surrounding the slow growth and financial struggles of Truth Social, a social media platform with Donald Trump as a major investor, raising questions about the company’s future amid increasing competition in the conservative social network space.