MW Why Trump Media once again called out 'naked short selling' as its stock dropped

By Tomi Kilgore

Parent of President Trump's Truth Social has complained to the SEC about potential illegal bearish bets made against its stock by a U.K.-based hedge fund

The parent company of President Donald Trump's social-media platform, Truth Social, is on the warpath against "naked short selling" again as its stock has fallen, this time directing its sniping at a U.K.-based hedge fund.

Trump Media & Technology Group Corp.'s stock $(DJT)$ ran up 11.7% on Thursday after the company filed a request with the U.S. Securities and Exchange Commission to investigate what it called "suspicious" trading activity. But even with that rally, the stock has still tumbled 44.9% since Inauguration Day.

So what is "naked short selling," and why is Trump Media blaming it again, even after its previous claims weren't verified?

Short selling is the legal practice of betting that a stock price will fall. While it often gets blamed for causing, or at least contributing to, a stock's volatility, studies based on actual trading volumes show that's usually not the case.

Don't miss: Short sellers are not evil, but they are misunderstood

To sell a stock short, an investor must first borrow it, with interest, from someone who owns it, on the belief that prices will fall. The borrower can then sell that stock, with the plan to buy it back at a lower price. The stock is then returned to the original owner.

The borrowing and shorting of stocks must be recorded and fully disclosed.

"Naked" short selling refers to the illegal act of shorting a stock before it is actually borrowed.

In a memo sent to the SEC on Thursday, Trump Media noted that U.K.-based Qube Research & Technologies, which uses mathematical models and technology to help it make investment decisions, disclosed in Germany on April 10 that it had sold nearly 6 million shares of 'DJT' short.

But according to Nasdaq data and third-party sources, the company said the total number of "DJT" shares shorted has remained at around 11 million since the end of March.

Basically, Trump Media said that fact that it couldn't be confirmed when Qube's short sales were conducted, or if they were made at all - and given the "history of suspicious trading surrounding DJT stock" - the lack of confirmation could be a sign of illegal naked short selling.

"We urge you to immediately investigate this suspicious trading and report your findings back to [Trump Media & Technology] and any relevant civil and criminal authorities," the company said in the memo.

Qube did not immediately respond to a request for comment.

There's another possible reason for the stock's weakness: The company recently filed to confirm that the 114,750,000 shares, or 50% of the shares outstanding, that President Trump received when Trump Media went public and that are held by the Donald J. Trump Revocable Trust, have been registered as able to be sold if the trust chooses to do so.

A year ago, when the stock lost more than half its value after Trump Media went public, Chief Executive Devin Nunes made a similar claim about naked short selling. He pointed the finger at four market participants, including Citadel Securities.

At the time, Citadel responded by saying Nunes was the type of person Trump would have fired on the reality show "The Apprentice."

Nunes made numerous appeals to regulators and even to Congress to look into the alleged illegal activity. Although the stock did land on the Nasdaq's Regulation SHO list of those that may have seen unlawful activity, nothing came of the allegations.

Read: Trump Media CEO renews assault on 'DJT' short sellers - but the math doesn't add up.

So Nunes did the next best thing, going after legal short sellers by outlining to the company's mostly retail shareholders what they can do so the shares they own can't be borrowed.

Nunes wasn't the first to blame naked short selling for a falling stock, and he certainly won't be the last.

-Tomi Kilgore

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April 18, 2025 12:41 ET (16:41 GMT)

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