Trump Media & Technology Group Corp’s (DJT US) Shares Outstanding and Float have been increasing this year with Shares Outstanding increasing from 30 million shares at the beginning of the year to just over 200 million shares today. DJT Float has increased from 29 million shares to 85 million shares in 2024. The largest shareholders are former president Donald J. Trump (114.75 million shares 57% of shares outstanding), United Atlantic Ventures Inc (7.525 million shares 3.76% of shares outstanding) and ARC Global Investments II LLC (7.40 million shares 3.70% of shares outstanding).

DJT’s merger lockup is expiring on September 19th allowing these major long shareholders to finally be able to monetize some, or all, of their shares. Not only will the possible new selling activity affect DJT’s stock price directly, it will also increase DJT’s stock lending pool which will facilitate increased short selling in the stock.

DJT short interest is currently $231 million, 14.79 million shares shorted, 17.46% SI % Float. According to our proprietary S3 algorithms we see that stock borrow utilization is at 99%, which is the sixth highest in the Russell 3000, and there are less than 200k shares of DJT available to borrow to support new short sales.

Over the last thirty days we have seen 4.2 million shares, worth $66 million, of DJT shorted, a +40% increase in total shares shorted. But only 100k shares shorted, worth $1.6 million, over the last week due to limited stock borrow supply.

With stock borrow supply low and short selling demand high the cost to borrow new shares of DJT stock is in the 30% to 40% fee range. If the increased long selling by insiders, who are not lending their stock, hits the market it should increase the stock lending pool, lower stock borrow rates and facilitate increased short selling.

While that is technically true, the intricacies of the stock loan market may throw a wrench into this expectation. The reality is that the stock lending pool only increases if long shares settle into accounts that either actively lend their long portfolio or can be rehypothecated by brokers who will lend those shares.

Using our Black Map product we can see the breakout between active and passive investors in a stock. Institutions that lend their long portfolios are passive investors looking for increased “risk-free” incremental revenues to bump up their gross returns by 5bps to 50bps (dependent on the makeup of their longs). These would include Mutual Funds, Pension Funds, ETF providers, Insurance companies, Sovereign Wealth managers, Family offices, Foundation/Endowments, Investment Advisors, Private Banking, etc. Most of these investors hold indexed assets and therefore the stocks with the largest lending pools are the constituents of the largest indexes such as the S&P 500, Nasdaq, and Russell 3000. Stocks that are not in many indexes, are not usually held in large size by passive investors and therefore have smaller lending pools.

DJT only has 4.59% of its Outstanding Shares held by passive investors:

In addition to passive investing there is also active investing which includes Brokers, Hedge Fund managers, Investment Advisers, Private Banking/Wealth Management, Investment Banking and Mutual Fund Managers, etc. While some of these investors may actively lend their long portfolio, most use margin and therefore their long shares are used as collateral and not lendable to the street by their long owners. But these shares may be rehypothecated by their brokers and lent to short sellers. Brokers typically cherry pick either the safest or most lendable shares in a margin account to use as collateral for their clients. These rehypothecated shares increase the stock lending pool.

DJT only has 2.23% of its Outstanding Shares held by active investors.

Finally, there are shares held by smaller institutions who do not have to report their long shareholdings quarterly and retail long shareholders. The long holdings by these smaller institutions are relatively insignificant in regard to stock lending but the holdings of retail investors, especially in securities line DJT or GME, can be significant. Unfortunately most retail long share holdings are in “fully paid” accounts and not margin accounts and are therefore segregated and not rehypothecatable by their brokers.

With lockup expiry on the 19th we should start seeing more availability in the stock loan market, but that of course depends how many of the locked-up shares are sold into the market and where those shares settle.

Yes, if the long shareholders who were not allowed to sell their shares due to the lockup do liquidate or trim their positions there should be more shares available to borrow. But only if those shares are bought by long shareholders who are either in stock lending programs or are in margin accounts where their shares can be rehypothecated by their brokers and lent to the street. If those shares settle in fully-paid for accounts or accounts that do not lend their long portfolio then there would not be an appreciable change to the stock loan pool.

Because DJT’s indexing will not change, there would be no reason the passive investors to suddenly buy DJT stock. The only hope for a substantial increase of DJT stock loan supply is for active investors to increase their present 2.23% level of DJT ownership.

It is unlikely that DJT stock loan supply will increase dramatically after the lock-up, although it will certainly increase somewhat.

Because of the lockup expiry, DJT's float will increase dramatically because insiders who were excluded from the tradable float will now be allowed to sell their shares. But just because a stock's float increases or decreases the change can have minimal impact to the stock borrow market due to the fact that it is not the absolute number of shares in the float but the number of shares in long shareholder accounts that either actively lend their shares or have shares that can be rehypothecated by their brokers that drives stock borrow supply.

A secondary point is that because there has been downward pressure on DJT's stock price the locked up long shareholders may be reluctant to sell their shares into a falling market and pull the value of their total long position even lower. These recently unlocked shares will probably be sold into the market in a very deliberate manner to limit downward pressure and not force DJT's stock price into a free fall. Expect the long shareholders who want to trim their long exposure to take their time and take weeks not days to execute their trades. Cashing out their stock will be a long and tedious process so that their own trading activity does not increase mark-to-market losses on their overall DJT holdings.

And finally, instead of selling their shares into the market the insiders may choose to simply use those shares as collateral for loans. Depending on the loan agreement those collateralized DJT shares may or may not be rehypothicatable and lent to the street.

If stock borrow supply grows appreciably expect a slew of short selling pushing DJT stock prices down, if not, it will continue to be the long buying and selling that drives DJT’s stock price up or down. Depending on how the presidential election forecasts lean, there will probably be more buying if President Trump is leading and more selling if Vice-President Harris is leading.

If DJT's stock price continues to trend downwards, momentum short sellers will be clamoring to get into the trade, increasing stock borrow demand and keeping rates high even if overall stock borrow supply increases.

Although DJT’s tradable float will increase dramatically after the lockup expiry, don’t expect a huge jump in stock loan availability or a resulting huge jump in short selling.