The recent merger of DWAC and DJT has captured the attention of investors worldwide.
The recent merger of DWAC and DJT has captured the attention of investors worldwide. With former President Donald Trump at the helm, DJT promises to revolutionize media and technology. However, beneath the hype lies a complex financial landscape that warrants scrutiny. In this blog post, we explore the reasons to consider shorting DJT.
1. Valuation Discrepancy
- DJT’s market capitalization currently stands at a staggering $7.5 billion. Yet, its revenue for the nine months ending September 30 was a mere $3.37 million. Such a wide gap between valuation and actual revenue raises eyebrows.
2. Short Interest and Borrowing Costs
- DJT is the most shorted SPAC in the U.S., with a short interest of 11.69%.
- The cost to borrow (CTB) fee for DJT stock is an astronomical 157.57%. This high CTB fee reflects limited stock availability, making it expensive for short sellers to bet against the stock.
3. Risk Factors
- DJT’s popularity hinges on Trump’s notoriety and fervent investor support. However, skepticism abounds regarding the company’s fundamentals and whether they justify the current valuation.
- Shorting DJT involves significant risks due to the elevated CTB fee and the unique dynamics surrounding this company.
4. Trump’s Corporate Bankruptcies
- Donald Trump’s corporate bankruptcies are essential context for understanding DJT’s risk profile:
- Trump Taj Mahal (1991): The $1.2 billion Taj Mahal Casino Resort in Atlantic City opened in April 1990. Just six months later, it defaulted on interest payments to bondholders, leading to its bankruptcy filing in July 1991.
- Other Bankruptcies: Two other Atlantic City casinos owned by Trump also declared bankruptcy in 1992 due to financial difficulties. The Plaza Hotel in New York, another Trump property, also filed for bankruptcy in 1992 after accumulating debt.
- Total Corporate Bankruptcies: Trump’s companies have filed for Chapter 11 bankruptcy protection six times. Chapter 11 allows companies to restructure or wipe away much of their debt while remaining in business under bankruptcy court supervision. Shareholders often lose a significant portion of their equity during this process.
In summary, while DJT’s stock price has surged, prudent investors must tread carefully. The financials and valuation of DJT raise red flags, and shorting the stock remains a risky trade. As the controversy swirls, only time will reveal whether DJT lives up to its lofty promises or becomes a cautionary tale.