The stocks of Trump Media and Technology have been plummeting since the beginning of the month and have now fallen below the issuance price. The significant decline in stock price not only caused heavy losses for some investors, but also dealt a serious blow to Trump's own assets.
On Wednesday, the official website of Trump Media Company updated a notice to prevent short selling, specifically guiding shareholders on how to prevent their stocks from being lent to short sellers for trading.
Kevin Murphy, a business professor at the University of Southern California, said that this move does indicate concerns among the company and shareholders about short selling Trump media stocks. But he also pointed out that managers who generally believe stocks are undervalued are not too worried about short sellers.
In other words, companies that believe their stock value is too low but have confidence in their strength are too lazy to intervene in the short-term speculation of short sellers. Murphy admitted that it was also the first time he had seen a company guiding shareholders on how to prevent their stocks from being lent to short sellers.
On Thursday, the stock price of Trump Media (DJT) surged by more than 25%, but it still halved from the official opening price of $70.90 on March 26th, and closed at only $33.19 on Thursday.
How to prevent short selling
Trump Media stated on its official website that brokerage firms promote short selling and generate revenue by lending DJT stocks held in shareholder margin accounts. The decline in stocks is profitable for short sellers and brokerage firms, but not for DJT shareholders.
Its proposal is that shareholders can keep their DJT stocks in the brokerage company's cash account, choose to withdraw from all securities lending plans, transfer the stocks to DJT's transfer agent Odyssey Transfer and Trust Company, or transfer them to the bank and keep them in retirement accounts to avoid short selling behavior.
Trump media also thoughtfully prepared the notification materials required by shareholders, from format to wording, teaching investors how to write letters to brokerage firms to prevent their stocks from being lent to short sellers.
Besides sniping bears, Trump's media move has another profound meaning.
According to the profit terms of the company's listing and merger transaction, if DJT's stock price remains above $17 per share in the coming days, the major shareholder Trump will receive rewards from the company, increasing his holdings of 78.75 million shares by an additional 36 million shares. According to Thursday's closing price of the US stock market, it is equivalent to Trump adding approximately $1.2 billion in wealth.