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Hating Trump is Costly – TDS Infected Investors Are Losing Hundreds of Millions

Trump Derangement Syndrome (TDS) may not be listed in the DSM-5, but it is quite real.  So real in fact, that among the investor class alone, haters of Donald J Trump have adamantly and consistently shorted the stock for Truth Social with ticker: DWAC, which today converted to ticker: DJT.

TDS seems clear when we evaluate the cost of shorting DWAC/DJT shares.  As Bloomberg reports:

Investors tempted to bet against Trump Media & Technology Group Corp. [DJT] are facing annual financing costs to borrow the shares of more than 150%, and risks that the stock’s meme-like volatility and loyal fanbase could burn them even more. The newly-public company is the most expensive US stock to bet against, with over $100 million of short interest, S3 data show. (emphasis added).

According to the same Bloomberg article, the interest cost to borrow shares of DJT is 200 times the average stock borrow rate for a short sale. 

Why is it so expensive to borrow shares of DJT relative to other companies?

Normally the supply of shares to borrow for selling short come from Institutional Investors such as mutual funds, hedge funds, exchange traded funds and insurance companies. However, these companies generally dislike President Trump as most of corporate America does given their woke agenda.  Also, many of these funds have investor committees where those with TDS would vote against allowing the purchase of Trump shares.  For this reason, we know that they generally wouldn’t buy shares of DWAC or DJT; and this circumstance is what leads to the high cost of borrowing.  This normally massive pool of stock to borrow from is just far too small.

In the case of ordinary investors, many do not agree to lend their shares for shorting, often because they simply check NO on the box when setting up a brokerage account or because they don’t understand and don’t want the additional risk.  Note, many brokers don’t share much or any of the returns from lending shares for shorting with the investors that own the shares. 

As a result of far lower lending of shares by institutional investors and typically less lending shares by ordinary investors, the pool of shortable shares is small and so the borrowing cost is extremely high.  Yet, comically, hate levels are equally high and so these TDS infected investors pay the massive borrowing cost to put on their short sale.

Setting aside the cost to borrow shares for a moment, Bloomberg reports mark-to-market losses have cost TDS suffering investors $158 million in 2024 alone.  This largely from the recent rally based on the approval of the SPAC by the SEC and then the rally of the DJT shares upon open today.

If we consider the extraordinary interest expense to borrow shares in combination with the mark-to-market lossses, it is likely that these TDS infected fools have lost well over the $175 million in 2024 alone.  Note, borrowing expenses are paid daily so they are separate from mark-to-market losses from shorting or those losses arising from the stock’s rise in value; hence, the borrowing expense would need to be added to the mark-to-market losses to capture the entire loss.

In Conclusion, TDS infected short sellers of DWAC/DJT have lost at least as much as Trump must post to the court in 9 days.  The difference is, when President Trump wins on appeal, he will get back his $175 million and the short sellers will get hit even harder as the stock rises on the news.

There is something that investors in DJT can consider to do to protect themselves from these TDS infected investors that create credit risk due to their emotion-based decision making.

Investors can consider to call up their brokers and tell them to disallow any lending of DJT shares on their account (or change this option online).  As investors restrict short sales of DJT shares, that will reduce the shortable pool, forcing the unwind of shorts to the extent of the reduction in the short pool, and drive up the cost of shorting DJT.  Note, to close a short sale, the investor buys shares to replace the borrowed shares they sold – driving the stock price higher.

This is permissible as you are simply exercising your legal right to disallow the lending of your shares to a short seller as a means to reduce credit risk that may fall on you.

Disclaimer:  To the extent you are interested in any of these thoughts and considering actions, please discuss the matter with your broker and/or attorney to be certain of legal and financial consequences.
 
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