Trump Media & Technology Group, the company behind the Truth Social app and associated with former President Donald Trump, encountered a tumultuous journey in the stock market recently. The stock, which trades under the symbol DJT mirroring Trump's initials, had surged in price but then abruptly lost 31% of its value over a two-day period, resulting in a substantial decrease in Trump's ownership value, amounting to about $1.9 billion.
The volatility surrounding DJT shares has led to speculation and comparisons to meme stocks, referring to companies influenced by social media hype rather than traditional financial indicators like revenue growth or profitability. Despite Truth Social facing challenges such as diminishing revenue and significant losses, the company's stock had witnessed a notable increase in October, possibly influenced by shifting presidential race polls and betting market predictions favoring Trump’s chances of winning.
The reasons behind the sudden decline in DJT stock remain unclear, although it appears that the stock attracted a mix of speculators and short sellers, the latter anticipating a decrease in the stock's value. Analysts suggest that part of the stock surge earlier in October might have been due to short sellers being compelled to buy back shares, triggering what is known as a short squeeze and driving the stock price higher. This situation has raised concerns about the squeeze risk associated with DJT stock. The company's large short interest coupled with Trump's substantial ownership stake of approximately 57% intensifies the potential for a squeeze scenario.