Trump Media Recovers after DJT Shares were Rattled by the Trump Hush Money Ruling

The social media platform bearing Donald Trump's name is recovering following a weeks-long slump that saw the stock price almost halve and caught investors off guard.

The announcement last week that early investors may sell tens of millions of shares caused the shares of Trump Media & Technology Group to plummet. Trump Media had earlier issued a warning about this development, saying it may lead to "a significant decline in the public trading price of our common stock."

The news has simply increased the level of doubt around the Trump Media stock, which was already there when it started trading in March following the merger with Digital World Acquisition Corp., a shell business.

Trump Media spun the news in a good light, claiming that if early investors converted all of their warrants into shares, they might make an extra $247 million in cash. It announced on Friday that it anticipated earning close to $70 million from the latest warrant cash exercise.

The stock price of Trump Media & Technology Group rises

Trump Media's Nasdaq shares, which are traded under the vanity ticker DJT, increased 21% on Monday to end at $33.52, bringing the company's market value to almost $6 billion.

These kinds of wild fluctuations are nothing new to investors in Trump Media, who have been taken on a wild trip. The stock has surged to as high as $79.38 since coming public earlier this year and fallen as low as $22.55.

Trump Media stock reflects the success of Donald Trump

The stock's performance mirrors Trump's. After the former president was found guilty on all 34 felony counts in his criminal hush money trial, the slow decline started. Trump Media's stock has fallen 48% since a New York jury convicted him guilty of falsifying corporate documents on May 30. Trump Media is traded on the Nasdaq composite under the vanity ticker "DJT."

Truth Social, Trump's preferred social media site, is owned by Trump Media, a corporation in which the former president and Republican contender holds a controlling ownership. 

Since the beginning of June, his paper fortune has decreased by billions. Unless the board lifts this limitation or shortens the lock-up period, Trump and other insiders are not allowed to sell stock until September.

Why does the DJT stock fluctuate?

The financial results of Trump Media are partially to blame for this volatility.  Trump Media is a far behind major social media players like Facebook, TikTok, and YouTube in the race for advertising revenue and user attention. With less than $1 million in revenue, it declared a $327.6 million net loss for the first quarter.

Officials at Trump Media have attributed the stock's volatility on "naked" short trading, an illicit type of short selling.

Devin Nunes, the CEO of Trump Media, requested a probe into the short selling claim in letters to Congress and other regulators. 

Instead of truly owning the shares, short sellers borrow them, sell them, and hope that the stock will decline in value, allowing them to repurchase the shares at a reduced cost and pocket the difference. "Naked" short selling is placing a wager on a stock's decline without taking out a loan or acquiring any shares.