Trump Media & Technology Group Corp (DJT) merged with Digital World Acquisition Corp (DWAC) today and began trading on the Nasdaq exchange with a spike to $79.38/share, +59%, on heavy trading. DJT’s stock price has subsequently eased down to $68.00/share, +36%.

DJT\DWAC is the most shorted SPAC in the U.S. with $168.6 million of short interest, 3.37 million shares shorted and 11.69% SI % Float.

We have seen increased short selling in DWJ\DWAC this year with 1.24 million shares shorted, worth $62 million. This is a +58% increase in total shares shorted as its stock price rose +185% (prior to today’s price move).

Due to the lack to stock borrow supply we have not seen the recent surge in short selling that is expected when a stock’s price is as volatile at DJT\DWAC. Over the last thirty days we have seen just 797 thousand new shares shorted, worth $40 million, a +31% increase in total shares shorted.

SPAC stock borrowing is usually limited because the usual stock lenders, long shareholders such as mutual funds & ETF providers, do not own SPACs in size and since SPACs are not in most of the larger indexes, passive long shareholders, who are also potential lenders, do not usually hold them. In addition, most retail shareholders are not lenders into the stock loan market, which also limits the number of shares in the lending pool.

As a result, any SPAC with a significant amount of short selling will usually have high stock borrow costs and limited stock loan availability. There is extraordinarily little stock borrow available in DJT\DWAC to support new short sales and stock borrow rates are extremely high. DJT\DWAC is the most expensive stock borrow in the U.S. with short interest over $100 million.

DJT\DWAC stock borrow utilization is over 99% and there are less than fifty thousand shares available to borrow at rates topping +150% fee (the average stock borrow rate is 0.60% fee and the fee to borrow a General Collateral stock like APPL or CVX is 0.40% fee). DJT\DWAC’s stock borrow rate will continue to climb as long as short-side demand stays strong in this stock.

Shorting DJT/DWAC has not been a profitable trade in 2024 with short sellers down -$158 million in year-to-date mark-to-market losses, -152% for the year. Shorts are down -$93 million in March month-to-date mark-to-market losses, a -73% return for the month. These losses include down -$61 million in mark-to-market losses on today’s +36% price move.

With short sellers staying in this trade even while paying over 250 times the average stock borrow rate for an U.S. short trade and almost 400 times to short a GC sock like APPL, there is huuuuge conviction (Trump pun intended) on the short-side that there will be a significant decline in its stock price in the short term. But, as can be seen by today’s stock price move, long shareholders have a much different and much more positive view on DJT\DWAC’s stock price.

Today’s stock price move will definitely squeeze some short sellers out of their trade as their mark-to-market losses mount. DJT\DWAC has an 85/100 score in our Squeeze Score metric and will certainly rise to the 100/100 mark after today’s trading.

But, at these high stock price levels, which have hit year-to-date highs, we will probably see new short sellers try and jump into this trade hoping for a short-term pullback back into the $30’s or lower. Shorts that have been squeezed out of this trade will be replaced by new short sellers at what they see as new attractive entry points on the short side. A volatile stock like DJT\DWAC sometimes has a revolving cast of characters on the short side, with bloodied longer-term shorts replaced by eager new short sellers looking for a quick price retracement.

One key factor in this trade is that the extremely prohibitive cost to borrow DWAC stock will be unpalatable for many short sellers. These rates will limit the number of potential short sellers who are willing to incur +150% financing costs to get into such a volatile trade. With short selling limited, it will be long buying and long selling that will determine the direction of DJT\DWAC’s stock price in the short term.

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