Trump Media stock rises, warns of possible market manipulation

Shares of Trump Media & Technology Group (DJT) are trading higher on Friday after the company's CEO, Devin Nunes, sent a letter to the Nasdaq asking for help enforcing short-selling rules. In the letter, Nunes raised concerns about four major firms that are shorting the stock — Citadel Securities, VIRTU Americas, G1 Execution Services, and Jane Street Capital— which he believes are targeting the stock.

Yahoo Finance's Rick Newman break down the details.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

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JULIE HYMAN: Trump Media CEO Devin Nunes warning the stock could be the target of naked short selling. Now that's a trading practice largely banned in the US and the EU. Yahoo Finance's Rick Newman joins us here to discuss naked short selling where you sell the short stock without first borrowing it, which is what you're supposed to do, Rick. And there's been some pretty forceful pushback against the idea that this is what's at work here.

RICK NEWMAN: Yeah, and Devin Nunes, the CEO, he's the former Congressman who joined this company. He also identified four firms, including Citadel, the huge trading firm run by the billionaire Ken Griffin that-- now he didn't say that-- he didn't come right out and say they are doing naked short selling. He said they are responsible for most of the volume in the trading of this stock, which has been very volatile, as you pointed out.

So his implication is that these four firms are doing naked short selling. And Citadel, in one of the most striking public statements it probably has ever issued said, Devin Nunes is, quote, "a proverbial loser who has no integrity." So a lot of spitball throwing going on here her. Who knows if naked short selling is actually happening or not? I mean, the-- this is kind-- seems like it's kind of a defensive move by the Trump Media & Technology Group to explain away the big drop in its share since it went-- since it went public.

So after it went public through that merger with the SPAC, the peak was $66. It went as low as $22. And it's been rallying lately. It closed today around $36. So it's up from the lows, but I guess the company was feeling some pressure to explain why it might be going down.

So they came up with this naked short selling theory. Who knows if this is going anywhere? The NASDAQ could investigate. They may not investigate. So we'll see what happens. But, you know, this is a roller coaster stock with a lot of intrigue surrounding it that dwarfs its actual revenue.

JULIE HYMAN: Right, most definitely. And, you know, it, of course, has losses too. The stock's been rebounding as we were showing. What's especially notable, just as a sidebar on the Citadel response to Nunes, is that Ken Griffin, who is the head of Citadel is a big-time Republican, right? So it's just interesting that the response even given that lens was a snarky as it was.

RICK NEWMAN: Well, he is a big Republican donor, but that doesn't make him a Donald Trump fan. In fact, I think he was pulling for Ron DeSantis. I don't know if he gave money to Ron DeSantis. But I think he was kind of in the governor's corner, hoping he might displace Trump. That, obviously, didn't happen. You know, it wasn't Ken Griffin himself who came out and said this. But very feisty tone from Citadel.

- Well-- and it is interesting, to Julie's point, that we're getting that feisty tone given also that it's not just Citadel. We should mention that there are four participants named here. We have Citadel, Virtu Americas, G1 Executive Services, and Jane Street Capital. They're saying that they've been responsible for more than 60% of volume of Trump Media shares traded.

Rick, is there anything else that we should know about those other four firms that were mentioned here in the degree to which this is really the volume-- that that much of the volume is something that can be attributed to those firms?

RICK NEWMAN: I mean, this is not a normal stock. So I mean, there's a very small-- I mean, this is a very small company. I mean, let's be clear about that. I mean, it had a grand total of $4 million in revenue in 2023. I mean, most-- that's like a pizza parlor could have that much revenue. I mean, most companies with $4 million in revenue don't go public, and nobody ever talks about most companies with $4 million in revenue. Obviously, it's different when it's a Trump company.

So this is getting more attention than it deserves in terms of its business heft. But it's-- one of the peculiarities here is there is not a lot of stock to trade. A lot of the stock is still held by insiders who have to wait six months before they can sell.

So it's actually very hard to short this stock because it's very expensive to borrow those shares, which in theory might tell you that creates an incentive for naked short selling, where you're not actually borrowing the shares or paying to borrow them. But that doesn't mean it's happening. I have no idea if naked short selling is happening here or not.

But it will be more interesting when there are more shares available to trade when the insider lock-up on selling expires, which will happen around September. And then we'll see how this trades when it's a little bit more normal of a stock where it can be shorted as much as the market wants to short it without the restriction of limited shares. So until then, I think it's just going to be a very volatile stock.

And by the way, this stock also rises and falls based on whether people think Trump's odds of winning the presidency are going up and down. So in that regard, it's almost like a barometer of Trump's odds of winning in November.