Shares of Trump Media have soared over the past month, rising 198%.
The recent slingshot comes after the stock fell to an all-time low of $12.15 on September 23. The stock is now trading at $36.30 per share.
Trump Media and Technology Group (TMTG) is the holding company that owns Truth Social, the new social media platform that former President Donald Trump created when he was kicked off mainstream sites in the wake of the Jan. 6 attack on the U.S. Capitol. 2021, and his refusal to accept that he lost the 2020 presidential election. The stock trades on the Nasdaq under the symbol DJT, which reflects the initials of Donald John Trump.
Despite the recent rally, TMTG’s financial performance has been lackluster. In the first half of this year, the company reported a loss of $344 million on revenue of $1.6 million. However, in recent weeks, the stock’s momentum could have piqued the interest of momentum-based investors eager to take advantage of the growth.
“The extremely high trading volume relative to the stock price suggests that there are many traders, both individuals and institutions, pursuing short-term momentum strategies,” said Jay Ritter, a professor of finance at the University of Florida. “These traders contribute to volatility because when the tide turns, many of them move in the same direction. A drop in stock price causes others to sell, causing the stock to fall. When stocks rise, they buy, pushing the price higher.”
There’s a slew of colorful names for short-term momentum investors. So-called sharks trade aggressively in search of quick profits; piranhas describe the chills of such traders. Cheetahs are high-frequency traders, and those who participate follow trades after they have started.
October trading volumes for TMTG were astronomical, with hundreds of millions of shares changing hands. More than 278 million shares traded on the market last week, according to data from Bloomberg. The week before, 194 million shares were traded.
Nevertheless, it is impossible to separate TMTG’s stock rise from Trump’s political fortunes. The stock often trades independently of fundamental factors related to the company’s business.
“The DJT increase is consistent with the increase in voting numbers for Donald Trump winning the presidential election,” Ritter said.
Election polls in recent weeks have shown Vice President Kamala Harris with a narrow lead over Trump. The race now appears to be almost evenly matched, with Trump having a slight lead in certain predictions. On Monday, The Economist announced in his election prediction that Trump had a 54% chance of winning the race. Nate Silver, founder of FiveThirtyEightsaid that even though the race is a 50-50 toss-up, he sees Trump winning.
TMTG has been compared to a meme stock, meaning it trades based on reasons that have nothing to do with business and financial figures. Instead, it often acts as a means for people to show their political support for Trump.
In a June SEC filing, TMTG estimated it had about 620,000 shareholders, “the vast majority of whom are ordinary retail investors.” The influence of certain dedicated investors, many of whom are Trump superfans, doesn’t always reflect the true health of the company because they often operate in echo chambers, said George Kailas, CEO of Prospero.ai, an online trading platform. .
“They surround themselves with Trumpers, taking people from online communities who don’t pass the purity tests,” Kailas said. “Then they are convinced that he cannot possibly lose, because they think that almost everyone agrees with them.”
This story originally appeared on Fortune.com
