For some investors on Wall Street, betting against former President Donald Trump's new social media company Truth Social has proven to be a very profitable gamble. Numerous amateur traders interviewed have collectively earned tens of millions through ‘short selling' the stock of Trump Media and Technology Group, the parent company of Truth Social.
While many of these traders do not actively support Trump politically, they point to the evident weaknesses in the company's financials as rationale for their bearish positions. Trump Media reported multi-million dollar losses and minimal revenue since launching last year, raising serious doubts about long-term viability. Other red flags include a tiny percentage of shares available for trading and exorbitant fees for short sellers.
Nevertheless, through careful research and use of options strategies, average investors have tapped into big returns. One Seattle-based trader estimates a guarantee the stock will eventually fall to zero. Others offset risks by pairing ‘put options' betting on a decline with ‘call options' profiting from potential upside swings. So far their collective paper profits total around $200 million from presciently shorting a stock that has sunk over 40% since debuting.
Of course, there remain pitfalls that could turn the tables. Wild price swings fueled by fervent Trump supporters buying the stock despite shaky business performance introduces uncertainty. The end of lock-up periods that restrict insider selling also looms as a risk, with the potential for an investor exodus pushing the share price drastically lower.
For now, amateur traders feel confident their thesis of an overvalued, money-losing company will ultimately prove true. As one put it, successfully profiting from Trump Media's declining fortunes is a welcome political bonus on top of financial success.
