Former President Donald Trump’s media venture, Trump Media & Technology Group, is facing allegations of potential market manipulation on the Nasdaq exchange. The company’s stock, trading under the ticker DJT, has been the target of short-selling activity, prompting concerns of “naked” short selling, a practice that is effectively banned in the U.S.
The letter sent to Nasdaq CEO Adena T. Friedman claims that some traders are engaging in naked short selling, selling shares they do not possess. This has led to a rollercoaster ride for Trump Media’s stock since its public debut, with shares losing two-thirds of their value before partially recovering.
Trump Media CEO Devin Nunes, a former Republican congressman, has called on Nasdaq to take steps to ensure compliance with regulations that prohibit naked short selling. The company’s stock rose 9.6% on Friday, but concerns remain about the impact of short selling on its value.
Short selling, a legal practice, involves borrowing shares of a stock to sell them with the hope of buying them back at a lower price. Naked short selling, on the other hand, involves selling shares without borrowing them, leading to potential market disruptions and undermining investor confidence.
Regulatory agencies like the SEC and FINRA oversee short selling practices to prevent abuses like naked short selling. Nasdaq has expressed its commitment to transparency and integrity in its markets and supports efforts to monitor and prohibit illegal trading practices.
While there is a shortage of stock available to borrow for short selling Trump Media shares, it is difficult to determine if naked short selling is occurring based on public data. The company’s stock has seen increased short selling and covering activity, but the extent of any illegal practices remains unclear.
As the controversy surrounding Trump Media’s stock continues, investors and regulators will be closely monitoring the situation to ensure market integrity and compliance with trading regulations.
