Trump Media CEO Devin Nunes has called for a Republican-led investigation into potential short-selling activities by eight financial firms. The move comes amid concerns over illicit practices affecting DJT, the majority shareholder of former President Donald Trump.
Nunes Calls for Investigation into Alleged Short-Selling Abuses Impacting DJT Stock Prices
In a letter to leading House committee chairmen, Nunes emphasized the urgency of safeguarding retail shareholders and ensuring compliance with relevant laws, including Racketeer Influenced and Corrupt Organizations Act (RICO) and tax evasion laws. CNBC reported that Nunes urged quick action to identify lawbreakers and determine if any laws have been violated.
Nunes named eight financial firms, including Apex Clearing, Clear Street, and Cobra Trading. They requested documents and testimony to investigate their involvement in short-selling activities related to DJT shares.
CNBC also reported that Nunes escalated efforts to combat short selling by encouraging shareholders to block their stock and seeking investigations into potentially illegal "naked" short selling.
The stock price of DJT has seen significant fluctuations since its public trading debut on March 26, trading 32% lower than its opening price. Despite this, Nunes suggested that the sharp decline might be attributed to naked short sales rather than the company's revenue justification.
Short Sellers Face High Costs and Risks in Betting Against Trump Media
Meanwhile, Bloomberg has drawn attention to the high costs of betting against Trump Media's stock. Short sellers face substantial financing fees, with annual borrowing costs surging up to 600%. This makes it challenging for professional managers to engage in short-selling activities.
The report emphasized the risks associated with short-selling Trump Media's shares, with short sellers needing the stock to drop by 12% over the next week to break even. Moreover, short sellers have suffered mark-to-market losses of $121 million this year, with Trump Media's shares up more than 150%.
Trump Media's high valuation, currently at $8.1 billion, has drawn criticism due to its low revenue and significant losses. However, the difficulty of borrowing shares and the stock's volatility have deterred many professional managers from shorting the stock.
In light of these developments, Trump Media has urged retail investors to make their shares unavailable for borrowing, while Nunes has been actively advocating for investigations into short-selling activities.
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