Technically, Trump Media and Technology Group (TMTG) (DJT) is a media company listed on the Nasdaq, with President-elect Donald Trump as its main shareholder. It owns Truth Social, a social media platform built around the idea of promoting “free speech” in opposition to the cancel culture. However, in practice, the stock is more of a bet on Trump’s political moves than Truth Social success. While I think the stock’s outlook is pretty bearish, as it trades completely disconnected from its fundamentals—just like a meme stock—I’m holding a neutral position on DJT because shorting such a hyped-up stock comes with its own set of risks.
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Take DJT’s performance over the last twelve months, for example. The stock has massively outperformed the broader market, jumping 76%. And just this year, there has already been high volatility in anticipation of President Trump’s inauguration on January 20th.
In this article, I’ll discuss the company’s fundamentals, examine what’s driving the stock’s rise, and share what we might expect going forward.
A Closer Look at DJT’s Fundamentals
From a purely fundamental perspective, the outlook for DJT stock is arguably bearish. The stock is driven by hype and is mainly used by traders to speculate on Donald Trump’s moves.
Take a look at the company’s recent Q3 earnings. Trump Media reported just $1 million in revenue, along with $4.7 million in interest income from the $673 million in cash and short-term investments on its balance sheet. Honestly, that’s the only positive thing you can say about the company’s fundamentals.
During the period ending in September, Trump Media raised around $340 million by selling 17,330,365 shares of common stock to Yorkville as part of a Securities Purchase Agreement (SEPA) at prices between $14.31 and $36.13. This deal allowed the company to raise capital while allowing investors to buy shares when they choose.
While Trump Media now has some financial breathing room and won’t be heading for bankruptcy anytime soon, especially considering the company’s $52 million negative operating cash flow over the past year, none of this comes close to justifying the company’s current market value of over $8.55 billion.
What’s Behind DJT Stock’s Recent Moves?
I’m holding a neutral stance on Trump Media and Technology Group (TMTG) stock. Still, it’s hard to ignore the high volatility lately, especially with President-elect Donald Trump’s inauguration coming up on January 20th. There’s obviously a lot of excitement around the event, and the stock has been moving in ways that don’t seem tied to its fundamentals. Instead, traders appear to be reacting to the hype surrounding the event, and as of January 14th, DJT is up 15% year-to-date, outperforming the broad market (SPY) by a significant margin.
Before jumping to conclusions, it’s important to point out that the rally since January 10th is not a short squeeze. Right now, only about 6.5% of TMTG’s float is shorted, roughly 12.7 million shares. The cost to borrow shares is also relatively low, at 0.8% per year, and utilization rates are 75%, so there’s still plenty of room there.
DJT in a Negative Gamma Environment
What’s actually happening around DJT is something called a gamma squeeze. Currently, the stock is in a negative gamma environment, meaning market makers (liquidity providers) need to hedge their positions by buying shares as the stock price increases. Here’s how it works: market makers sell call options to traders, and when those calls are sold, they take on the risk that the stock might rise. To protect themselves from this risk, market makers buy shares of the stock. As the stock price increases, they have to buy even more shares to maintain a balanced position, which is called hedging.
This creates a feedback loop: As the stock rises, traders get more excited and buy more calls, which forces market makers to buy even more shares to hedge, driving the price even higher—specifically, DJT’s price in this case.
Where DJT Stock Might Be Headed Next
The negative gamma situation doesn’t automatically mean bearishness or bullishness around DJT shares. But after periods of upward movement driven by market makers buying shares to hedge, the price tends to slow down. If the rally loses momentum—like if there’s no positive news or new buyers coming in—the price will likely start to correct, as we saw on January 14th (see below).
That said, the big catalyst ahead—Trump’s inauguration on January 20th—has yet to fully realize its potential. It could bring in more news and hype, driving FOMO (fear of missing out) among investors, which might push the stock higher. However, the real risk here is that if more catalysts do come, there’s a good chance Trump’s shares could start getting sold off.
At the end of December last year, Trump transferred 114.75 million shares—53% of Trump Media & Technology Group’s total stock—to a trust controlled by his eldest son. While President Trump said three months ago that he didn’t plan to sell his stake, this recent move suggests that his son could sell some or all of those shares, potentially without his father’s approval, maybe for diversification reasons.
In my view, the Trump family will likely be tempted to sell some shares soon, especially considering the inflated $8.55 billion market cap of Trump Media & Technology Group.
Conclusion
Trump Media shares are absolutely not meant for long-term holding—this stock is a trader’s playground, pure and simple. That’s why I don’t believe President Trump and his family will stop trading their shares, especially during big rallies fueled by speculation. While there are opportunities to make money off the short-term volatility, timing these trades is tricky. Eventually, I think a partial sell-off of Trump’s stake will trigger a major sell-off in DJT stock.
Given the speculative nature of the stock, I prefer to stay on the sidelines and have a neutral rating.
