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Trump Media suggests illegal shorts are cratering its stock

Katherine Doherty, Bloomberg News on

Published in News & Features

“Nasdaq is committed to the principles of liquidity, transparency, and integrity in all our markets,” a representative for Nasdaq said in an emailed statement. “We have long been an advocate of transparency in short selling and have been an active supporter of the Securities & Exchange Commission’s rules and enforcement efforts designed to monitor and prohibit naked short selling.”

Image Problem

Short sellers have long had a dark image in the popular mind — not always justified — that paints Wall Street actors as out for profit at the expense of American companies and their employees, as well as retail traders. Practitioners of short selling argue that they expose weak companies and serve as a check on managers who exaggerate their prospects.

Trump Media tapped into the negative image in a Thursday regulatory filing that offered advice on how stockholders can shield their shares from being lent to short sellers. The filing suggested the practice was a tussle between the “retail investor” and “sophisticated and institutional investors.” Friday’s letter to Nasdaq similarly suggests big market makers are profiting at the expense of retail traders, attempting to pit Wall Street against mom and pop.

Keeping the stock price up would also bolster the next round of shares that Trump Media might hand out. If the stock trades above $17.50 for 20 of 30 days, Trump Media holders would be entitled to receive as many as 40 million additional shares — with the majority earmarked for Trump himself.

 

The company’s listing in March also restricts certain insiders from selling shares for six months, a lockup period that carries into October. The new shares and the end of the lockup could hurt ordinary shareholders by diluting their stakes, and perhaps drive down the market price if the insiders decide to cash out large portions of their holdings.

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(—With assistance from Carmen Reinicke.)


©2024 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.

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