Trump Media has gotten Congress involved in its crusade against short sellers
Source: Business Insider
Apr 24, 2024, 3:45 PM EDT
The CEO of Trump Media filed a letter on Tuesday urging House Republican committee heads to look into the possibility of illegal manipulation of the company's stock, which has plunged since it went public at the end of March. Devin Nunes said in the letter that the firm has identified a "strong indication" of shady trading, and the committee should swiftly investigate its scope, including "whether any laws, including RICO statutes and tax evasion laws, were violated."
The letter said the Truth Social parent company, which is majority-owned by former President Donald Trump, has fallen prey to "naked" short selling, an illicit practice that involves selling shares before knowing if any are available to borrow in order to short them.
The CEO pointed out the cost of shorting shares of Trump Media was the highest in US markets by a long shot as of April 3, which means that brokers have "a significant financial incentive to lend non-existent shares."
Trump Media stock has been on a roller coaster ride since its IPO at the end of last month, hitting $35.05 a share Wednesday, up almost 8% after a 54% drop from its peak.
Read more: https://markets.businessinsider.com/news/stocks/trump-media-spac-djt-ceo-letter-congress-naked-short-sellers-2024-4
captain queeg
(10,248 posts)I guess well see if the rethugs in congress are still in thrall to TSF.
Raven123
(4,870 posts)In principle. No reason. Just seems like betting on failure and it bugs me. Reminds me of the SNL skit recently parodying FanDuel ( or one of those gambling apps) in which participants bet on their neighbors misfortunes.
Having said that, I see no reason why TFG shouldnt be shorted, as long as it is done legally. Heck he has been shorting the USA for the last 9 years
Traurigkeit
(250 posts)kimbutgar
(21,206 posts)Cracked down on it.
oldsoftie
(12,612 posts)As well as shorting lower volume companies.
Martin Shkreli cost a lot of people a lot of money shorting a company right before filing a bogus "citizens petition" to tank the stock. All legal. Shouldn't be
If you think a price should be lower, buy put options
Bernardo de La Paz
(49,045 posts)In the long run, selling whether it is short or covered, shifts investment from failing companies to successful ones, on average, across many stocks and investors, over time. Individual short sales are prone to mistakes just like regular buys and sales so not every short is the right move.
For every sale, there is a willing buyer, whether the sale is short or not. At any time, the short seller may get a margin call and have to buy the stock to pay back the stock lender. Ultimately the short seller can be expected to buy the stock to close out the position at a profit or loss -- another sale.
Thus short selling adds liquidity to the market for buyers.
Oopsie Daisy
(2,675 posts)Short selling can serve as a check on excessive speculation or overvaluation in the market. When a stock is considered overpriced, short sellers can provide a counterforce by actively betting against it, potentially helping to correct any unwarranted price surges.
Short selling can help uncover overvalued stocks or identify potential market inefficiencies. When short sellers analyze and act upon negative information about a company, it can lead to more accurate pricing of its shares, reflecting the true market sentiment.
louis-t
(23,297 posts)And he always fails anyway.
IronLionZion
(45,534 posts)I worry about anyone who trusts that guy or Trump
Captain Zero
(6,824 posts)Guess he must be a Socialist now.
Bernardo de La Paz
(49,045 posts)It is illegal for that reason. Naked short selling is not a part of regulated capitalism, it is a part of crime.
Regular short selling means selling something that exists, a share borrowed from an owner of the stock who has made it available on loan via a margin account and similar arrangements. Almost always that has to be paid back by the shorter to the stock owner, sooner or later.
If your post is not about the implied topic (short selling) but rather about the fall of DJT stock, then you need to be explicit about the context shift.
Traurigkeit
(250 posts)sybylla
(8,526 posts)not likely to survive for long. Why tf would anyone buy it? Why would its value grow?
iluvtennis
(19,875 posts)and the laws need to change - GMAFB.
IronLionZion
(45,534 posts)but there are opportunities for better regulations here.
iluvtennis
(19,875 posts)Bernardo de La Paz
(49,045 posts)Naked short selling is selling something that doesn't exist.
Covered short selling is selling shares that exist because their owner has loaned them out to the market maker to aid liquidity.
The distinction is important.
iluvtennis
(19,875 posts)BadgerKid
(4,555 posts)Some of the meme stock followers have been complaining about naked short selling for a few years.
Bernardo de La Paz
(49,045 posts)NBachers
(17,143 posts)Oopsie Daisy
(2,675 posts)* is a crime, right? While CEOs may assert plausible deniability if they claim they were genuinely unaware of the lack of evidence or the misleading nature of their statements, this may not absolve them entirely from legal or regulatory consequences.
The degree of personal responsibility will depend on factors such as the CEO's knowledge, intent, and the specific legal requirements in the jurisdiction involved.
Old Crank
(3,632 posts)interventions are so quick to want government to step in.
Roy Rolling
(6,936 posts)👏
Hotler
(11,445 posts)Roy Rolling
(6,936 posts)Beware of false prophets sending MAGAts off to war. Truth Social is a terrible idea, its a terrible stock, and its a terrible investment.
Every decent investor knows ETTD.
Bristlecone
(10,133 posts)That sued a twitter cow, wrote this letter?
Shocked.
Miguelito Loveless
(4,474 posts)that is fine with me. It is just another way to game the system to make money while doing nothing productive.
hadEnuf
(2,213 posts)What I do see is how Republicans and MAGATs run to the congress, SCOTUS and everyone else when they have a problem or want something. Government is nothing more than a tool or a weapon for their personal problems or wants.
Less government my ass.