Well, the dead cat bounce theory is likely out of the picture as, today, social media platform Truth Social (NASDAQ:DJT) added over 3% in afternoon trading. The bad news here is that the gains came as Truth Social sounded the alarm about its shares being used in “naked short selling” operations, a point which is likely making some wonder just how manipulated the stock really is.
Truth Social not only informed shareholders but also brought Nasdaq and the Securities and Exchange Commission (SEC) into the loop, alleging there was “potential market manipulation” as naked short selling was cropping up.
Naked short selling, for those not familiar, is short selling without either borrowing the shares in question, or confirming that they are even available to be borrowed.
The practice is banned in the United States and the European Union, but reports note that it still occurs. How? A series of loopholes and a lag between paper trading and electronic trading systems can allow a trader to engage in short selling without actually borrowing shares.
A Timely Warning
The word comes at an interesting time; just yesterday, Truth Social offered up advice for shareholders on how to prevent their shares from being used in short-selling attempts, including such advice as putting the shares into a retirement account or contacting their broker to specifically opt out of any kind of lending activity that would see their shares put to work in such a fashion. While Truth Social didn’t actively accuse anyone of engaging in naked short selling, the fact that it appears on the “Reg SHO Threshold List” is a point worth considering.
Is DJT a Good Stock to Buy Right Now?
A look at the last five days in trading for DJT stock shows that it’s up 15.93% during this timeframe, and most of those gains came from the last three days. In fact, the first two days of the five-day period were down, but the last three days have all featured rising recovery.
