Trump Media & Technology Group (TMTG), the parent company of the conservative social media platform Truth Social, has come under financial pressure as a prominent hedge fund has revealed a $105 million short position against the company.
The move, disclosed through regulatory filings, indicates that some investors are betting heavily against the long-term viability and valuation of TMTG, even as the platform remains a central part of Donald Trump’s media strategy.
According to a report by Reuters, the hedge fund Kerrisdale Capital Management, known for its aggressive short-selling strategies, announced it is betting that Trump Media’s stock price is significantly overvalued. Kerrisdale has frequently targeted companies it believes are overpriced or have unsustainable business models.
The timing is notable: Trump Media only recently went public via a merger with Digital World Acquisition Corp (DWAC), a special purpose acquisition company (SPAC).
Following the merger, shares of the newly listed entity (traded under the ticker DJT) saw wild price fluctuations, driven in part by retail investor enthusiasm and Trump’s political brand.
Trump Media’s Volatility Raises Red Flags for Investors
The hedge fund’s short position adds another layer of scrutiny to a company already facing financial and operational challenges. Despite going public with a high valuation—at one point reaching a market cap of over $9 billion—Trump Media has failed to generate meaningful revenue.
Recent financial disclosures show that Truth Social generated just $4.1 million in revenue in 2023, far below expectations for a company valued in the billions. Additionally, Trump Media reported net losses of more than $50 million last year, intensifying concerns about its long-term viability.
Short-sellers like Kerrisdale are essentially betting that a stock’s price will fall. To do this, they borrow shares and sell them at the current price, hoping to buy them back later at a lower price and return the shares for a profit.
In this case, Kerrisdale is wagering that the market enthusiasm surrounding Trump Media will not last as its fundamentals continue to disappoint.
In its investor note, Kerrisdale wrote:
“We believe Trump Media’s valuation is completely detached from reality. With virtually no revenue and mounting losses, DJT is a meme stock driven more by politics than profits.”
Political Drama Meets Wall Street Skepticism
Trump Media’s market performance has been closely tied to Donald Trump’s political activities and public profile. As the 2024 election season heats up, DJT’s stock has seen spikes related to Trump’s campaign appearances and legal battles, with traders treating the stock as a proxy for Trump’s political momentum.
However, financial analysts argue that the company’s long-term value should be based on its actual business metrics—not the former president’s name.
The speculative nature of Truth Social’s growth prospects, combined with declining user engagement and increased competition from platforms like X (formerly Twitter), Meta, and TikTok, paints a challenging picture for future profitability.
Additionally, Trump’s ongoing legal issues and the potential outcomes of his various indictments could further impact investor sentiment and media interest in Truth Social.
What This Means for Retail Investors
Trump Media has become popular among retail investors, especially those who support Trump politically. Many of them have purchased DJT stock not solely for financial reasons, but as an expression of ideological support.
However, hedge funds and institutional investors like Kerrisdale are signaling that the current market price of Trump Media does not align with traditional financial analysis.
Financial advisors caution retail traders to separate emotion from investment decisions. Meme stocks—those that gain popularity through social media hype and retail enthusiasm—can be especially volatile and prone to steep drops once the initial buzz fades.
Wall Street expert and CNBC contributor Dan Niles commented:
“What we’re seeing with Trump Media is reminiscent of other SPAC and meme stock bubbles. When reality sets in, retail investors are often left holding the bag.”
Investors are encouraged to evaluate DJT with the same due diligence they would apply to any high-risk, speculative asset.
Final Thoughts: Is DJT the Next Meme Stock Collapse?
The $105 million short position by Kerrisdale Capital is a major vote of no confidence in the financial future of Trump Media. While the political clout of Donald Trump has helped Truth Social maintain media visibility, the platform has not yet proven its ability to compete in a crowded digital media market.
Whether DJT can survive the scrutiny of institutional investors remains to be seen. What’s certain is that hedge funds are watching closely—and they’re betting big on a downturn.
As always, investors should tread carefully and consult with financial advisors before making decisions based on hype or political sentiment.
You can read Kerrisdale Capital’s full commentary via their website, where they outline their analysis of DJT and similar overhyped SPAC-backed companies.
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