Trump Media tells shareholders how to block their DJT stock being loaned to short sellers

Trump
Media
is
making
a
point
of
telling
its

shareholders
how
to
prevent
their
stock
from
being
loaned
to

short
sellers
—
who
bet
the
price
of
the
shares
will
drop.

The
short-selling-prevention
tips
posted
Wednesday
on
Trump
Media’s

website
come
as
its

DJT
stock
has
fallen
sharply
in
price
since
it
began
being
public

trading
on
March
26
—
and
as
short
sellers
have
taken
a
keen
interest
in
the
owner
of
the

Truth
Social
app
despite
relatively
high
fees
to
finance
such
trades.

“It
certainly
shows
concern”
about
short
selling
of
Trump
Media
stock,
said
Kevin
Murphy,
a
business
professor
at
the
University
of
Southern
California
who
is
an
expert
on
executive
compensation.

“I
haven’t
seen
it
before,”
Murphy
said
when
asked
how
common
it
is
for
companies
to
give
shareholders
instructions
on
how
to
thwart
short
sellers.

“Managers
who
…
think
the
stock
is
undervalued
aren’t
going
to
be
overly
concerned
about
short
sellers,”
he
said.

Trump
Media’s
share

price
rose
sharply
on
Thursday
by
more
than
21%,
before
giving
back
some
of
those
gains
in
afternoon
trading.
But
the
share
price
was
still
more
than
55%
lower
than
what
it
opened
at
on
March
26.

Trump
Media
disclosed
on
April
1
that
it
had
booked
a
$58
million
loss
for
2023,
with
just
$4.1
million
in
revenue
for
that
year.

Former
President

Donald
Trump
is
by
far
the
biggest
shareholder
in
Trump
Media,
owning
nearly
60%
of
its
stock.
And
his
78.75
million
shares
could
soon
grow
by
36
million
shares
if
DJT’s
price
stays
above
$17
per
share
in
the
coming
days
due
to
an
earnout
provision
in
the
merger
deal
that
took
the
company
public.

But
Trump,
who
is
the
presumptive
Republican
presidential
nominee,
and
Trump
Media
since
late
March
have
seen
billions
of
dollars
in
market
value
evaporate
from
share
price
declines.

On
Wednesday,
after
two
straight
days
of
sharp
price
drops,
the
company
included
a
supplement
to
its
frequently
asked
questions
list
on
its
website,
which
it
detailed
in
an
8-K
filing
on
Thursday
morning
with
the

Securities
and
Exchange
Commission.

The
supplement
adds
a
significant
amount
of
instructions
to
what
was
originally
posted
on
the
FAQ
on
Wednesday,
under
the
heading: “How
do
I
prevent
my
shares
from
being
loaned
for
a
short
interest
position?”

Short
selling
is
the
practice
of
borrowing
shares
of
a
company’s
stock,
and
then
quickly
selling
those
shares
for
a
certain
amount
of
money.
The
short
seller
then
waits,
hoping
that
the
share
price
will
drop
over
some
period
of
time,
so
that
they
can
then
repurchase
the
same
number
of
shares
and
give
them
back
to
the
lender,
pocketing
the
difference
between
what
they
first
sold
the
shares
for
as
profit
after
paying
brokers’
fees.

“For
long-term
shareholders
who
believe
in
the
Company’s
future,
the
Company
is
highlighting
the
following
actions
you
can
take
with
your
brokerage
firm
to
prevent
the
lending
of
your
shares
for
short
selling,”
Trump
Media
said
in
its
supplement
to
its
FAQ
on
Wednesday.

The
tips
include
holding
DJT
shares
in
a
cash
account
at
a
brokerage
firm
as
opposed
to
a
margin
account, “opting
out
of
any
securities
lending
program,”
moving
Trump
Media
shares
to
the
company’s
designated
transfer
agent,
and
transferring
shares
to
a
bank
and “holding
them
in
your
retirement
account.”

The
instructions
include
a
helpful
form
letter
that
shareholders
can
send
to
their
brokers.

The
letter
says, “Please
accept
this
written
instruction
to
make
sure
that
the
following
securities
are
held
in
my
cash
account
only
and
accordingly
are
not
available
for
any
stock
loan
activities.”

“I
hereby
expressly
opt-out
of
any
securities
lending
programs
and
instruct
you
to
not
loan
out
any
of
my
shares,”
the
letter
says,
before
a
section
that
the
sender
can
fill
out
with
their
number
of
shares.

The
detailed
instructions
contrast
with
the
much
simpler
instructions
posted
initially
Wednesday
in
the
FAQ,
which
just
said, “To
prevent
shares
from
being
loaned
for
a
short
interest
position,
contact
your
brokerage
to
place
restrictions
on
the
lending
of
your
shares
to
short
sellers.”

A
Trump
Media
spokeswoman
told
CNBC
that
the
company ”believes
it
has
a
responsibility
to
provide
factual
information
in
response
to
the
questions
its
shareholders
are
asking.”

Short
selling
is
particularly
risky
because
it
is
markedly
different
than
a “long
position”
in
a
stock
—
in
which
a
person’s
maximum
loss
is
what
they
paid
to
buy
the
shares.

In
contrast,
a
short
position
in
a
stock
can
in
theory
see
its
price
rise
without
stopping,
leaving
the
short
seller
responsible
for
paying
exponentially
more
money
to
buy
back
the
shares
to
return
to
the
lender.

Trump
Media
in
its
updated
FAQ
nodded
to
that
risk
in
noting
that
brokerage
firms
loan
shares “to
sophisticated
and
institutional
investors”
to
do
short
sales.
Brokers
often
insist
that
customers
who
do
short
sales
with
them
are
experienced
investors,
and
have
sufficient
cash
or
collateral
on
hand
that
can
insure
that
if
the
short
trade
goes
bad
they
can
cover
their
losses.

Trump
Media
also
pointed
out
that
lending
shares
to
short
sellers
can
earn
brokerage
firms “an
alternative
source
of
revenue.”

“If
the
price
of
the
stock
in
fact
decreases,
then
the
brokerage
firm
and
the
sophisticated
and
institutional
investors
will
have
made
a
profit,
while
the
ultimate
retail
investor
has
not,”
Trump
Media
told
its
shareholders.

Only
about
5
million
shares
of
DJT
have
been
available
to
short
out
of
more
than
136
million
company
shares.
And
much
of
the
5
million
shares
were
already
locked
up
in
short
positions
earlier
this
month.

But
Ihor
Dusaniwsky,
managing
director
of
predictive
analytics
at
S3
Partners,
told
CNBC
in
early
April, “What
I’m
hearing
on
the
Street
is
that
if
[an
amount]
of
stock
becomes
available,
shorts
are
taking
it
down.”

Clarification:
This
story
has
been
updated
to
clarify
the
explanation
of
a
long
position.