Rally in Truth Social’s shares pressures short-sellers

Shares have gained for five consecutive days, though they are around 30% lower since it began trading on March 26 at $70.90

Short-sellers in Trump Media & Technology Group are feeling the heat from the recent rally in the company’s stock and the higher cost of borrowing its shares, according to analytics firm S3 Partners.

Shares of the company, which operates former President Donald Trump’s social media firm Truth Social, climbed around 7% on Tuesday. Shares have gained for five consecutive days, though they are around 30% lower since it began trading on March 26 at $70.90.

That advance has hit the returns of short-sellers, leaving them with market-to-market profits of $91.1 million for the month of April, or a gain of 50%, according to Ihor Dusaniwsky, president of S3 Partners.

Short-sellers, who profit when the share price drops, are still 68% lower since the trading debut in late March, with $94.8 million of YTD mark-to-market losses, he said.

Short-sellers are “exiting their positions due to the huge cost of stock borrow financing and the stock being up 75% in just over two weeks,” he added.

Short-sellers exiting a position must buy back the underlying stock, exerting upward pressure on its shares.

But the recent price action does not necessarily mean bearish investors are running away, Dusaniwsky said.

While some are unwinding their trades, there are “a slew of replacements ready, willing and able to enter the breach and short the stock at those higher levels.”

The higher cost of borrowing the firm’s shares is adding to their burdens, he added.

Initiating a new short position in Trump Media & Technology Group carries a fee between 600% and 650%, while existing positions carry fees of 330%, as per S3 data. Fewer than 100,000 shares are available to borrow.

At these stock borrow levels short sellers need DJT’s stock price to decline by three-eighths to just break even and cover daily stock borrow financing costs, Dusaniwsky added.