Trump Media & Technology Group is warning the Nasdaq $NDAQ of “potential market manipulation” related to the “naked” short-selling of its stock.
In a letter dated Thursday addressed to Nasdaq CEO Adena Friedman, Trump Media CEO Devin Nunes said the company’s stock appeared to be manipulated by a practice known as “naked” short-selling, or the illegal sale of shares without borrowing them first. Nunes wrote that this was “particularly troubling given that ‘naked’ short selling often entails sophisticated market participants profiting at the expense of retail investors.”
He pointed to Trump Media’s appearance Wednesday on the Nasdaq’s “Reg SHO threshold list” — a list of securities whose transactions failed to clear at a registered clearing agency for five consecutive days — as “indicative of unlawful trading activity” of its stock.
While “naked” short-selling is a potential reason why a security would fail to clear, there are many reasons why a stock could be on the Reg SHO list.
Nunes said that, based on data he said was made available to the company, just four market participants are responsible for more than 60% of the trading volume of Trump Media shares: Citadel Securities, VIRTUAmericas, G1 Execution Services, and Jane Street Capital.
In response to the letter, a Citadel spokesperson said Nunes “is the proverbial loser who tries to blame ‘naked short selling’ for his falling stock price.”
“Nunes is exactly the type of person Donald Trump would have fired on The Apprentice,” the spokesperson said. “If he worked for Citadel Securities, we would fire him, as ability and integrity are at the center of everything we do.”
VIRTU, G1, and Jane Street did not immediately respond to requests for comment Friday.
“Nasdaq is committed to the principles of liquidity, transparency, and integrity in all our markets,” a Nasdaq spokesperson said. “We have long been an advocate of transparency in short selling and have been an active supporter of the SEC’s rules and enforcement efforts designed to monitor and prohibit naked short selling.”
When traders short-sell a stock, they are betting that the stock will fall by borrowing shares and selling them high, with the belief that they can be repurchased later at a lower price. According to data from S3 Partners, there is an ongoing shortage of Trump media stock available to borrow, with fewer than 100,000 shares currently up for grabs.
Trump Media, the company behind former President Donald Trump’s Truth Social, went public on the Nasdaq under the ticker DJT on March 26, after completing its merger with Digital World Acquisition Corp., a special purpose acquisition company, or SPAC.
Shares of Trump Media were on a weeks-long free-fall following the disclosures of multi-million dollar losses from operations in 2023, the registered resale of substantially all of its outstanding securities, and the announcement of its own live TV streaming platform.
Despite the plunge in Trump Media’s stock value, its daily short volume has remained stable, suggesting that sales are coming from long-sellers rather than shorts.
This year so far, 4.34 million Trump Media shares worth $144 million have been shorted, S3 data shows. Trump Media was among the most expensive stocks to short: Year-to-date, Trump Media short-sellers are down $68.0 of mark-to-market losses, a 46% drop for the year.
On Wednesday, the company posted guidance on how to prevent short-selling of Trump Media shares on the FAQ portion of its website, guidance it said was aimed at “long-term shareholders who believe in the Company’s future.”
The company’s stock has mounted a turnaround to end the week, with its shares spiking two days in a row and recovering more than $1 billion in market value. Shares of Trump Media were up almost 4% on Friday, trading at $34.45 for a market capitalization of $4.71 billion.
In its first trading week, Trump Media shares saw a high price of $79.38, giving it a more than $8 billion market cap — a feat that led several analysts to lump Trump Media in with so-called “meme stocks” such GameStop $GME, AMC, and Reddit $RDDT. Meme stocks refer to company shares that become wildly popular online and are traded feverishly by retail and individual investors, sending prices soaring regardless of the company’s actual operating results or prospects.