Trump Media, owner of Truth Social, to start trading Tuesday

Shares of Digital World Acquisition Corp (DWAC) soared on Monday. On Friday, shareholders approved a deal to merge Digital World and Trump Media. The combined company is called Trump Media & Technology Group Corp. and will start trading on Tuesday, March 26 under the ticker DJT. Trump Media is the parent company of the social media company Truth Social.

In the video above, Yahoo Finance's Rick Newman explains why there is still "a lot that can go wrong" for the stock.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich.

Video transcript

AKIKO FUJITA: Trump Media and Technology Group the parent company of Truth Social will begin trading tomorrow on the NASDAQ but the social media company facing plenty of skepticism including from our very own Rick Newman. Rick, skeptical. I'm shocked.

RICK NEWMAN: Well, this company is having a nice ride for the moment. I mean, it's up by quite a lot so far this year. And that's obviously based on the expectation of it going public. And people are trading.

I think a lot of the individual buyers of the stock are people who want to support Donald Trump. And if he actually wins the presidency in 2024, then the operational. Outlook for this company might be fairly good.

But there is a lot that can go wrong here. And I looked at the short interest. In other words, the people betting that the stock price is likely to fall rather than rise.

So based on data from S3 Partners which tracks this kind of thing short interest in this company, which is going to be known as Trump Media and Technology Group when it goes public is about 11%. That's not super high. The average for most companies is about 3% to 4%.

But short interest is severely constrained by a lack of available shares. I mean, in order to short, you have to borrow the shares, pay for that privilege. And there just are not very many shares you can borrow.

So if you kind of adjust for the lack of available shares to borrow to short the stock, there is very strong interest in shorting this stock which suggests a lot of investors think that the price is going to fall. And there are a lot of reasons it could fall. First of all, the company has never been profitable.

It's a niche player to say the most compared with other competitors like X and Facebook. Trump's personal financial situation is a factor here based on whether he might need to sell shares. And then what if Trump loses the election?

I mean, at that point, his political career will probably be over. And what's the point of a social network where he's the main attraction? So, I mean, this is going to be just a very interesting way to watch.

And I think this stock is a very interesting way to monetize whatever you think the outcome of the 2024 presidential election is going to be. If you think Trump is going to win, you might go long on the stock. If you think Trump is going to lose, you might go short on the stock. So very interesting play.

JOSH LIPTON: Very interesting. We'll keep watching. Rick Newman, thank you, buddy.

RICK NEWMAN: Bye, guys.