Shares of Trump Media shot up more than 9% on Wednesday, hours after the company revealed it was urging House Republican committee leaders to investigate possible “unlawful manipulation” of its stock.
The stock boost also came one day after a deadline passed for former President Donald Trump, the company’s majority owner, to become eligible for an additional 36 million “earnout” shares. That stake was worth more than $1.3 billion as of the share price at 3:25 p.m. ET.
It was unclear what spurred the sudden rise of Trump Media, which began the trading day down nearly 5% before turning positive later Wednesday morning.
The company’s CEO, Devin Nunes, in a letter Tuesday asked the GOP chairs to probe “anomalous trading” of the stock in order to gauge the extent of the alleged manipulation and “whether any laws including RICO statutes and tax evasion laws were violated.”
The request doubles down on Nunes’ claim that Trump Media, which trades under the ticker DJT, is the apparent victim of “naked” short selling, the practice of selling a company’s shares without first borrowing them for that purpose.
Trump Media, which began trading on the Nasdaq on March 26 after completing a lengthy public merger, was far and away the most expensive U.S. stock to short as of early April.
Brokers therefore “have a significant financial incentive to lend non-existent shares,” wrote Nunes, himself a former House GOP chair, in the letter.
The probe is necessary to protect the company’s shareholders and to ensure that “the perpetrators of any illegal activity can be held to account,” he wrote.
The CEO addressed the letter to four House committee leaders: Financial Services Chairman Patrick McHenry, R-N.C., Judiciary Chairman Jim Jordan, R-Ohio, Ways and Means Chairman Jason Smith, R-Mo., and Oversight Chairman James Comer, R-Ky.
Spokespeople for the four chairmen did not immediately respond to CNBC’s requests for comment on Nunes’ letter.
The letter comes as the stock price of Trump Media, which created the social media app Truth Social, continues to trend down in volatile trading sessions.
DJT shot up in its trading debut and has touched a high of nearly $80 a share, but it has since lost more than half of that value.
Trump Media has been described as a meme stock and a “scam” by some analysts who are quick to highlight the disparity between the company’s lack of revenue and its roughly $5 billion market capitalization.
The letter from Nunes also escalates a feud with Citadel Securities, the capital markets firm founded by GOP megadonor Ken Griffin.
Nunes referenced Citadel Securities in an April 18 letter to Nasdaq CEO Adena Friedman, warning that DJT “appears on Nasdaq’s ‘Reg SHO threshold list,’ which is indicative of unlawful trading activity.” He referenced Citadel Securities again in the new letter he sent to Congress.
The Reg, or Regulation, SHO list was designed to monitor short sales and flag potentially problematic failures to deliver securities to parties in a transaction. But “there are many justifiable reasons why broker-dealers do not or cannot deliver securities on the settlement date,” the SEC notes on its website.
Nunes told Friedman in his letter that more than 60% of DJT shares have been traded by just four market participants, including Citadel Securities.
The firm responded with a statement blasting Nunes as “the proverbial loser who tries to blame ‘naked short selling’ for his falling stock price.”
“Nunes is exactly the type of person Donald Trump would have fired on [The] Apprentice,” a spokesperson for Citadel Securities added in that statement Friday.
A spokeswoman for Trump Media shot back: “Citadel Securities, a corporate behemoth that has been fined and censured for an incredibly wide range of offenses including issues related to naked short selling, and is world famous for screwing over everyday retail investors at the behest of other corporations, is the last company on earth that should lecture anyone on ‘integrity.’”
A representative for Citadel Securities did not immediately respond to a request for comment.