The share price of Trump media rose greater than 12% in afternoon trading on Monday, continuing a surprising rise that began in mid-April.
The DJT ticker rose greater than $5 per share just before 1 p.m. ET.
Trump Media owns the Truth Social app, which is incessantly utilized by the corporate's majority shareholder, former President Donald Trump, who can be the presumptive Republican presidential nominee this 12 months.
“TRUTH SOCIAL IS THE TRUE VOICE OF AMERICA!!!” Trump wrote in a post on the web site earlier Monday.
The company began public trading on March 26 at over $70 per share. Over the subsequent few weeks, share prices plummeted, reaching a low closing price of $22.80 on April 16.
DJT share price
Since then, the worth of Trump Media shares has greater than doubled, increasing the corporate's market capitalization and the ex-president's stake by billions of dollars.
The increases occurred without there being any significant news about an improvement in the corporate's results.
However, Jay Ritter, an economics professor on the University of Florida, said the recent rise in Trump Media's stock price would be the short-term results of the corporate's recent statements and regulatory filings aimed toward short sellers.
“Over the last week or so, the company has informed its shareholders about how it may make it more difficult for short sellers to lend their shares, and it is possible that the number of shares available for short selling has decreased, thereby increasing the number of shares [cost] “The target interest rate for short sales should increase,” said Ritter, an authority in IPOs.
“And it's possible that some of them [short sellers] I shortened that.”
Ritter also said a “short squeeze” could occur, through which short sellers who bet that the stock price will fall are forced to purchase back shares of Trump Media to exchange the shares they borrowed to short sell have. Such buybacks can drive up the stock price, which in turn increases pressure on short sellers to purchase shares to cover their positions, which also results in price increases.
Earlier on Monday, Trump Media released one Press release This essentially underscored previously released information to shareholders advising them methods to avoid having their shares loaned out in order that short sellers could bet on price declines.
The company last week asked House Republican committee chairs to analyze possible manipulation of Trump Media's stock price by short sellers.
Ritter said that filing, which has not yet been acted upon, could also help drive up the stock price.
But no matter how much the attack on short sellers impacts the worth, Ritter said Trump Media stays a “meme stock” whose market valuation has little to no connection to the underlying business and future business prospects.
Trump Media has greater than $200 million in money, but its social media business posted losses of $58 million last 12 months on revenue of just $4.1 million.
But the corporate's effective face is Donald Trump, whose political supporters are among the many small shareholders who drive up the share price.
“With these meme stocks, it’s really difficult to predict what’s going to happen on a daily or weekly basis,” Ritter said.
“Whether we're looking at $32 a share a week ago or $46 now, we're arguing whether the stock is overvalued by 1,000% or 2,000%,” he said.
Ritter identified that Trump Media's market capitalization, considering the 36 million additional shares recently granted to Trump since the stock price remained above $17.50, is about $8 billion.
“A company with less than $5 million in annual revenue that is losing a lot of money and has no business plans that will generate much growth,” Ritter said. “The company may be worth a few hundred million dollars, but $8 billion seems to be on the order of 2,000% of what it should be worth by traditional standards,” he said.
Ritter expects Trump Media's stock price to eventually fall into the low single digits.
If meme stocks grow to be “fantastically overvalued,” he said, “you can easily predict with a high degree of certainty that the long-term returns are going to be pretty poor.”
This is developing news. Check back for updates.
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