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One of the latest reports from Trump Media and Technology Group (TMTG) is advising its shareholders about shielding their stake from short sellers. This is a relatively unusual move for a company but it aligns with the general character of disruption synonymous with the Trump brand.
Trump Media & Technology Group has suggested avenues by which its shareholders can prevent their DJT stocks from being loaned to short sellers. This strategic move can be seen as a mechanism to protect its share price, ensuring less volatility in its stock market performance.
Short selling, which is commonplace within financial markets, involves an investor borrowing shares and immediately selling them, expecting that they will be able to buy them back at a lower price in the future, return the shares to the lender (usually a broker), and pocketing the difference. Short selling can lead to inflated downward pressure on a company’s stock, creating higher volatility and potentially causing the share price to drop significantly, sometimes referred to as a short squeeze.
TMTG has now taken steps to protect its shareholders and its shares from this type of volatility. By issuing guidelines to its shareholders, the company is looking to introduce stability and resilience to its stock. This is a strategy that goes beyond shareholder engagement to shaping stakeholder behavior and protecting investor interest.
The mechanism for preventing stock being loaned to short sellers fundamentally involves the shares held being declared as ‘not lendable’. For long-term investors, this is often a feasible option, essentially giving them more control over their shares.
The action suggested by TMTG has its roots in an increasing trend of shareholder activism being seen in the financial market. Individual shareholders, emboldened by the success of social media-fuelled campaigns against hedge fund short sellers, are using their ability to prevent their shares from being loaned out for short selling. This collective action, where thousands of small shareholders can unite to protect a firm, can have a major impact.
By providing a clear pathway for shareholders to designate their shares as ‘not lendable’, TMTG has potentially created a shield against short selling attacks. In an open letter to its shareholders on its website, the company provides an instruction guide outlining the exact steps that shareholders need to follow to stop their shares from getting into the hands of short sellers.
This move is not without controversy, as critics argue that short selling is a vital mechanic in keeping the financial market healthy by ensuring overvalued companies are brought down to a reasonable market value. However, proponents of the method argue that it is a necessary step to protect shareholder investments and maintain the stability of the company’s stock.
Additionally, while the Trump Media & Technology Group’s unique approach may not be a standard measure adopted by most firms, this unconventional strategizing could resonate with its unique base of stakeholders, further bolstering the company’s position in the market.
Overall, by advising its shareholders on how to block their DJT stocks from being loaned to short sellers, TMTG is reinforcing its image as a maverick innovator in the world of business. As the company guide its investors in safeguarding their investments, this preventative strategy signals a game-changing shift in how companies may interact with their stakeholders, shape stakeholder behavior, and protect investors’ interests moving forward.
