In the wake of a major merger announcement involving Trump Media & Technology Group (NASDAQ:DJT), market participants have notably intensified bearish positions on the company's shares. This surge in short selling activity highlights skepticism about the sustainability of the recent trading rally despite the company's ambitions to expand into AI data center operations.
According to data compiled by S3 Partners, short interest in Trump Media jumped by approximately 31% following the disclosure of a $6 billion all-stock merger with TAE Technologies, a firm affiliated with Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL). The rising short interest suggests that an increasing number of traders anticipate a decline in DJT's share price after a brief upswing linked to the announcement.
Since the December 18 announcement, shorted shares nearing 16 million have edged close to levels last seen in October, representing a significant wager against the company’s stock. Valued at the closing price of $13.77 on Friday, these short positions equate to around $218 million in bets expecting the stock to fall.
The market response to the merger announcement was initially enthusiastic, with DJT shares surging more than 30% overall and peaking at a 63% increase within the first two trading sessions post-announcement. The momentum continued with a 4% rise on Friday and a modest 0.45% gain in after-hours trading, as reported by Benzinga Pro.
In parallel with these trading developments, the company’s founder, former President Donald Trump, holds a substantial stake of approximately 115 million shares, accounting for roughly 40% of Trump Media. However, post-merger ownership is projected to dilute to about 20%, reflecting the impact of the new all-stock transaction, per Reuters analysis.
Despite the recent uplift, DJT stock still records a nearly 60% decline over the past twelve months, underscoring persistent concerns regarding the company’s financial stability and strategic direction. Benzinga Edge Stock Rankings reinforce this view, noting that while the stock exhibits a strong short-term price trend, the medium- and long-term outlook is notably weaker.
The merger proposal, which brings together Trump Media and TAE Technologies — a subsidiary under Alphabet with AI and data center initiatives — marks a strategic pivot aiming to leverage emerging technologies. However, the market’s reaction demonstrates that many investors remain cautious about the commercial viability and integration risks involved.
This cautious positioning is reflected not only in the significant increase in short interest but also in the notable ownership dilution felt by key stakeholders, signaling potential long-term challenges ahead.
Overall, while the merger announcement has provided a temporary boost to Trump Media's stock price, the marked rise in bearish bets and the dilution of founder ownership underscore unresolved investor reservations over the company's future trajectory and financial health.
Key Points:
- Short interest in Trump Media & Technology Group surged 31% after announcing a $6 billion all-stock merger with Alphabet-backed TAE Technologies.
- Current short positions amount to approximately $218 million, indicating increased trader expectations of a stock price decline post-rally.
- Despite a sharp initial price jump of up to 63%, DJT shares remain down nearly 60% year-on-year, revealing ongoing financial and strategic concerns.
- Founder Donald Trump’s ownership is set to dilute from about 40% to roughly 20% following the merger transaction.
Risks and Uncertainties:
- Potential stock price volatility due to rising short interest and market skepticism following the merger announcement.
- Ownership dilution reducing founder influence, potentially impacting company governance and strategic direction.
- Continued financial losses raise concerns about the company’s long-term viability amid competitive and operational challenges.
- Uncertainty regarding successful integration and performance of AI data center ambitions linked to the merger.