Trump Media’s convenient complaint about short sellers

You have a valuation problem when a company with $4.1 million in annual revenues is valued at more than $5 billion.

It’s ironic, then, that Trump Media chief executive Devin Nunes is complaining about “potential manipulation” of its stock by short sellers.

Over-valued stocks require more short sellers, not fewer, but few shorts can bet against the stock due to exorbitant interest costs.

That hasn’t stopped Nunes from asking the Nasdaq and Congress to investigate possible manipulation by shorts.

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The company has also offered retail shareholders advice on preventing brokers from lending out their shares to short sellers.

“Sophisticated market participants”, it says, can use shady trading practices to profit “at the expense of retail investors”.

This is an obvious appeal to the Reddit retail trading brigade who helped orchestrate an epic short squeeze during 2021′s meme stock mania. Another squeeze appears unlikely, given shorts are finding it so difficult to bet against the stock, but retail buying can potentially juice the stock higher. Indeed, shares recently bounced some 50 per cent off their lows, even if the stock remains way below last month’s IPO (initial public offering) price.

The fact the stock has traded above $17.50 for 20 out of 30 trading days has triggered a reward of 36 million extra shares, currently valued at $1.4 billion, for Donald Trump. He can’t sell yet due to a six-month lock-up period, so there is a cynical logic in the idea that complaining about shorts might attract retail investors and keep the stock higher for longer.

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