Current:Home > FinanceTrump Media tells Nasdaq short sellers may be using "potential market manipulation" in DJT shares-LoTradeCoin
Trump Media tells Nasdaq short sellers may be using "potential market manipulation" in DJT shares
View Date:2024-12-23 20:26:35
Trump Media & Technology Group is alerting the Nasdaq exchange that its stock — trading under the ticker DJT, after former President Donald Trump's initials — may be the victim of "potential market manipulation" due to short-selling activity.
The letter, which was sent Thursday to Nasdaq CEO Adena T. Friedman, claims that some traders are relying on so-called "naked" short selling, which is when an investor shorts a stock without first borrowing the shares. It's a practice that is effectively banned in the U.S., with regulators requiring trading firms to make sure that traders have the securities on hand to complete a short sale.
The complaint comes after a wild ride for Trump Media's stock since going public last month on the Nasdaq exchange. The shares lost two-thirds of their value from an initial peak, slicing billions of value from the fledgling media business, whose primary asset is the social media service Truth Social.
While Trump Media has regained some of that lost ground, rising 28% this week, some investors had complained on Truth Social that they suspected short sellers were contributing to the decline.
"Reports indicate that, as of April 3, 2024, DJT was 'by far' 'the most expensive U.S. stock to short,' meaning that brokers have a significant financial incentive to lend non-existent shares," Trump Media CEO Devin Nunes, a former Republican congressman from California, wrote to April 18 letter to the Nasdaq CEO.
Nunes asked for Nasdaq to "advise what steps you can take to foster transparency and compliance by ensuring market makers are adhering" to regulations that block naked short selling.
Shares of Trump Media rose $3.19, or 9.6%, to $36.38 on Friday.
The agencies that would regulate naked short selling include the Securities and Exchange Commission and FINRA, the financial industry regulatory authority that oversees broker-dealers, as the latter companies are those that execute short sale trades on behalf of customers.
Nasdaq is "committed to the principles of liquidity, transparency and integrity in all our markets," the said in a statement to CBS MoneyWatch, the stock exchange said.
"We have long been an advocate of transparency in short selling and have been an active supporter of the SEC's rules and enforcement efforts designed to monitor and prohibit naked short selling," it added.
Short selling versus "naked" short selling
Short selling, which is legal, occurs when a trader borrows shares of a stock they believe will lose value, and then immediately sells the shares on the market for cash proceeds. Later on, if the stock price falls, the trader purchases that stock at the lower price, and then returns the shares to their trading firm from where they were originally borrowed.
The short seller's goal is to purchase the stock at a lower price than the borrowed shares, to pocket the difference in value.
But "naked" short selling, which is illegal in the U.S. if it is done intentionally, skips the step where the trader borrows shares of the stock, meaning that the investor sells shares they do not possess. Naked shorts can lead to large declines in a target company's stock price, while also undermining market confidence, according to law firm Kohn, Kohn & Colapinto.
There's currently a shortage of stock available to borrow to make a short sale against Trump Media shares, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, wrote to CBS MoneyWatch. The stock has seen increased short selling this year, but also recent short covering, which is when a trader purchases the stock to cover the trade, he added.
Still, it's impossible to tell from public data whether any naked short selling occurring, he added. That's because so-called "fail-to-deliver" data, which tracks when an investor in a trading contract fails to make good on their end, could be related to long positions as well as short sales, he pointed out.
- In:
- Wall Street
- Nasdaq
- Donald Trump
- Truth Social
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (45)
Related
- Missing Ole Miss student declared legally dead as trial for man accused in his death looms
- Prominent 22-year-old Palestinian protester Ahed Tamimi arrested by Israel on suspicion of inciting violence
- Louisiana police chief facing charge of aggravated battery involving 2022 arrest, state police say
- No. 18 Colorado stuns No. 1 LSU, trouncing NCAA women's basketball champs in season opener
- Ford agrees to pay up to $165 million penalty to US government for moving too slowly on recalls
- Megan Fox Shares She Suffered Miscarriage While Pregnant With Her and Machine Gun Kelly's Baby
- Third GOP debate will focus on Israel and foreign policy, but also on who could beat Donald Trump
- Why RHOA's Shereé Whitfield Ended Up in a Wheelchair at BravoCon 2023
- NFL overreactions: New York Jets, Dallas Cowboys going nowhere after Week 10
- To figure out the future climate, scientists are researching how trees form clouds
Ranking
- Gisele Bündchen Makes First Major Appearance Since Pregnancy
- Britain's loneliest sheep rescued by group of farmers after being stuck on foot of cliff for at least 2 years
- Wisconsin GOP leader downplays pressure to impeach state election administrator
- Portuguese police arrest the prime minister’s chief of staff in a corruption probe
- Mike Tyson vs. Jake Paul press conference highlights: 'Problem Child' goads 'Iron Mike'
- Wisconsin GOP leader downplays pressure to impeach state election administrator
- Special counsel says Trump's attempts to dismiss federal election case are meritless
- A series of powerful earthquakes shakes eastern Indonesia. No immediate reports of casualties
Recommendation
-
Waymo’s robotaxis now open to anyone who wants a driverless ride in Los Angeles
-
Man killed after pointing gun at Baltimore police, officials say
-
Jewish man dies after altercation at dueling Israel-Hamas war protests in California
-
South Carolina justice warns judicial diversity is needed in only state with all-male high court
-
NBA players express concern for ex-player Kyle Singler after social media post
-
Kenny Chesney, Zac Brown Band announce 2024 stadium tour: How to get tickets
-
Lebanese woman and her 3 granddaughters killed in Israeli strike laid to rest
-
Kidal mayor says 14 people dead in northern Mali after series of drone strikes near rebel stronghold