Trump Media short sellers face $420 million loss amid volatile election surge

Investors betting against Trump Media & Technology Group (DJT) have suffered a staggering $420 million loss, as the company's stock surged dramatically with Donald Trump's election victory, according to a report by financial analytics firm S3 Partners, as detailed in a report by Reuters.

Trump, 78, clinched a decisive win in the presidential race on Wednesday, defeating Democratic candidate Kamala Harris. In the weeks leading up to the election, DJT's stock saw a massive 196 per cent jump, turning the company’s shares into a volatile barometer for Trump’s reelection chances, the Reuters report explained further.

The stock, which tracks his election odds, gained significant attention alongside online gambling platforms like Polymarket and Kalshi, becoming a "meme stock" with a loyal following of retail investors, often characterised by their "diamond hands" mentality—refusing to sell no matter the price fluctuations.

Trump Media, the parent company of the Truth Social platform, is primarily owned by Donald Trump himself. The company operates a social media site and a streaming service. Its stock has attracted considerable short interest, contributing to its extreme volatility.

According to S3, the combination of a small float, heavy short interest, and the fervour of Trump supporters has made DJT highly susceptible to a "short squeeze," where rapid price increases force short sellers to cover their positions, exacerbating the price rise further.

In the days leading up to the election, DJT's stock experienced multiple halts due to wild price swings. On the day of Trump’s win, short sellers faced significant losses, with one report estimating a $77 million loss on 14 million shares at $5.50 per share.

With so many investors betting against the stock, the potential for a continued short squeeze remains high, S3 noted. The report highlighted that this situation makes DJT a key focus for market participants in the post-election period, with its price expected to stabilize closer to Trump’s inauguration in January.

The biggest beneficiary of the stock's meteoric rise has been Trump himself. Since March, his stake in the company has ballooned, reaching as high as $5.2 billion before settling at around $4.1 billion following the election.

The report suggests that Trump's financial windfall from the stock’s ascent, combined with his presidential victory, positions him for significant gains in the months ahead. In the face of these market fluctuations, Trump Media’s stock remains a highly speculative and volatile asset.