With Donald Trump back in the Oval Office, Trump Media & Technology Group (NASDAQ: DJT) finds itself at the center of heightened market scrutiny.
While Trump’s presidency helped propel DJT shares to a 36% gain over the past year, the stock is now facing significant volatility, driven by a surge in short interest and concerns over its long-term fundamentals.
Classic ‘buy the rumor, sell the news’ dynamic for DJT shares
In the days leading up to Trump’s inauguration on January 20, 2025, short interest in DJT stock rose sharply, signaling skepticism about the sustainability of its recent rally.
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Data retrieved by Finbold from Fintel shows that on January 17, 2025, the short volume reached 6,624,267, with a short volume ratio of 44.43%, one of the highest levels during the observed period reflecting bearish sentiment even as the stock benefited from pre-inauguration optimism.
Post-inauguration, the trend persisted. On January 21, the day after Trump’s swearing-in, the short volume ratio remained elevated at 42.60%, with more than 4.8 million shares sold short out of a total trading volume of 11.4 million shares.
Notably, the spike in short interest coincided with a steep decline in DJT’s stock price. After closing at $35.59 on January 21 (down 11.09%), the stock dropped further in pre-market trading on January 22 to $34.85 (-2.08%).
A classic ‘buy the rumor, sell the news’ pattern, where speculative buying ahead of a major event gives way to profit-taking and short selling once the event materializes.
The influence of Trump’s presidency
As the majority owner of Trump Media, Donald Trump’s political fortunes are closely tied to the company’s performance. His return to the presidency undoubtedly fueled optimism around DJT, contributing to its strong rally in the months leading up to the inauguration.
However, this reliance on Trump’s political capital also exposes the stock to heightened volatility. Investor enthusiasm can quickly turn to skepticism, particularly if the company fails to capitalize on the momentum generated by Trump’s political influence.
Trump Media’s financial fundamentals also raise significant concerns. The company’s price-to-sales (P/S) ratio is elevated, suggesting that shares are overvalued relative to their historical averages.
Featured image via Shutterstock
