Trump Media Surges in Late Trading as Election Results Roll In
(Bloomberg) -- Shares in Donald Trump’s social media company surged in trading on Robinhood Markets Inc.’s 24-hour platform as early returns in the US presidential election bolstered bets the Republican would reclaim the presidency.
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Shares surged on Robinhood’s platform to $48.74 as of 10:04 p.m. in New York, running up against the 20% upper limit of trading bands implemented by Blue Ocean Technologies, which Robinhood uses to execute overnight trading orders. Based on that, the lowest possible level for the stock overnight is $32.50, a company spokesperson confirmed.
The volatility bands are important because Trump Media & Technology Group Corp. shares have swung wildly in recent weeks as investors use the stock as a proxy for Donald Trump’s election prospects.
The swings continue a string of volatility that saw shares move at least 10% in either direction during each of the past eight sessions. More than 19 million shares changed hands in regular late trading as investors used the stock to game out results from polls that began tallying votes.
A Trump win, the thinking goes, could potentially drive users to Truth Social, an X-like site that the former president uses as his primary conduit to the public. The website has struggled to attract new users and advertisers since Trump Media debuted on the stock exchange after a blank-check merger. If Harris prevails, the likelihood that it continues to languish is high.
“The run-up seems to be driven by meme-stock type enthusiasm for Trump in general,” said NYU law professor Michael Ohlrogge. “It’s reasonable to think that would increase as a result of Trump winning the election. If Trump were to lose I’d anticipate a pretty big drop in share price.”
Trump Media would be worth roughly $10.6 billion if the gains on Robinhood’s platform held into regular trading. The former president’s net worth would see a $1.7 billion boost if that were the case given his nearly 115 million share stake.
Trump Media shares more than doubled in October as betting markets showed gamblers favored the Republican, even as high-quality polling showed little change from the deadlock that prevailed since Harris entered the race. The company is worth more than Whirlpool Corp. and Harley-Davidson Inc. despite bringing in revenue of less than $1 million in the second quarter. The disconnect from the polls — and particularly the company’s fundamentals — make the election a major catalyst.
Options set to expire on Friday show the stock has an implied annualized volatility of over 700% — roughly triple its already eye-popping 10-day volatility of 236%, data compiled by Bloomberg show. For reference, its historical volatility over the past month is more than quadruple that of Bitcoin and Nvidia Corp.
Whatever happens in the election, long-term prospects for Trump Media are difficult to tease out, according to professors and investors who follow the shares.
A victory for Trump may not equate to a more valuable company, especially since Trump Media is unprofitable and has struggled to grow its user base, Ohlrogge said.
“A lot of people seem to think that if Trump wins the election, it is going to magically make Truth Social far more valuable,” he said. “I don’t see much reason to believe that.” The company’s inability to deliver meaningful gains in users and revenue, despite the close election, make it “hard to see Trump winning the presidency as making a particularly big difference,” he said.
The stock’s performance has been detached from its fundamentals since debuting in March, with Tuesday evening’s rally coming just hours after Trump Media reported a net loss in the three months ending Sept. 30 of $19.2 million and net sales of just over $1 million, a filing showed.
Likewise, a loss may not sink Truth Social entirely, given Trump’s popularity among his political base. Companies including MicroStrategy Inc. and Tesla Inc. have shown that larger-than-life leaders “can move stocks,” said Matt Tuttle, CEO of Tuttle Capital Management.
Short sellers have long circled Trump Media, according to data from analytics firm S3 Partners. The firm says that more than 97% of all borrowable shares are already used to bet against the company, with fewer than 1 million shares available to borrow to support more bearish bets.
“Either the lack of stock-loan borrow supply, or high financing costs to short the stock, or the high volatility in the name has reigned in any attempt of a large rush of short selling,” said S3’s Ihor Dusaniwsky.
If Trump Media shares rally after the election, it could prompt investors to rush to the exit before losses grow, he said in a message. Bearish investors are down $149 million this year, though it has been a roller coaster with a swing of more than $300 million in paper losses and profits.
When the stock rises, it is based on the idea that Trump’s campaign has gained steam. When it stumbles, it usually parallels declines in industries that are perceived to benefit from a Trump re-election. The company’s underlying business remains detached from its $7.4 billion valuation, market watchers say.
In Tuesday’s regular session, shares quickly plunged 18% in a matter of minutes before trading higher after triggering three volatility halts within 15 minutes. While they’re up 179% from a September closing low, the stock is down more than 40% from its initial closing price.
“You could call it a meme stock, you could call it a cult stock, but it’s a stock that is not trading on its fundamentals today,” said Stanford University law professor Michael Klausner. “But perhaps people are betting on its fundamentals if Trump wins.”
--With assistance from David Marino.
(Updates with share movement and detail in the second and third paragraphs.)
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