Is DJT Stock a Holding in Any ETFs Yet?

Trump Media & Technology Group Corp. (DJT) has risen 40% in the past week as the 2024 presidential election season heats up. 

But has DJT stock built enough of a market presence to become a holding in an exchange-traded fund?

While it hasn't gained a big footprint in the ETF world, DJT stock, which began trading on the Nasdaq exchange March 26, has managed to become a holding in roughly a dozen ETFs, albeit with allocation weights mostly below 1%.

According to a June 18 SEC filing, Rex Shares, in association with Tuttle Capital Management, plans to offer single-stock ETFs with 200% long and 200% inverse exposure to 22 companies, including Trump Media & Technology Corp.

“When I look at single stock ETFs, I look at it from a couple different aspects,” CEO Matthew Tuttle told etf.com. “What’s popular today, what are retail traders buying, but I also want to look at what they are likely to be talking about tomorrow.”

If Donald J. Trump’s ongoing legal challenges don’t present a major financial hurdle for the former U.S. president, and his fledgling media company can rise to sustained profitability, DJT stock would still need to pass some relatively stringent selection criteria to increase its market presence and be added as a component to major market indexes. 

Sales and earnings also matter, and Trump's company reported an operating loss of $12.1 million and generated revenue of just $770,500 in the first quarter.

While DJT has entered as a small position in a handful of funds, many ETFs track a benchmark index, such as the S&P 500, and the process for adding a new stock to an index can be multi-layered depending on the specific index provider and the characteristics of the index itself.

DJT Stock and Index Eligibility Criteria

Stocks don't become members of a stock index by chance. There's a selection process conducted by the index provider (like S&P Dow Jones Indices or MSCI) to ensure the chosen stocks accurately represent the index's objective. For a newly traded stock like DJT to be added to an index, there are multiple factors to be considered. 

By following these selection criteria and maintaining a review process, index providers aim to ensure their indexes accurately reflect the market segments they represent.

Eligibility Criteria 

Most indexes have a set of eligibility criteria a stock must meet before being considered for inclusion. These criteria can include: 

• Market capitalization (size) thresholds: Indexes might target large-cap, mid-cap, or small-cap companies based on their market value. DJT stock’s market cap is roughly $6.4 billion, which is large enough to be added to a small-cap, midcap index or "total market index."
• Exchange listing: The stock must be listed on a major stock exchange. DJT stock is listed on the Nasdaq, which along with the New York Stock Exchange (NYSE), is an example of a major exchange. 
• Liquidity: The stock should have a minimum level of trading activity to ensure the stock's price accurately reflects its true value and minimizes any distortions when the index itself is calculated. Newly traded, highly publicized stocks like DJT can have high trading volume early on, but volumes can fall with declining investor enthusiasm. 
• Profitability: Some indexes might require companies to demonstrate consistent profitability over a specific period. Trump Media and Technology Group has publicly released only one quarter of financials in its history.
• Float: The tradable shares available to the public might be considered, excluding restricted shares held by major investors. 

Index Methodology

Each index provider has its own methodology for selecting and weighting index constituents. There are two main approaches: 

• Market-cap weighted: Indexes like the S&P 500 and Russell 2000 weight each stock based on its market capitalization. The larger the company, the greater its weight in the index. If DJT stock's $6.4 billion+ market cap can hold or increase, it can be added to more ETFs in the future.
• Rule-Based: Some indexes use a set of rules to select and weight stocks. These rules might consider factors like industry sector representation, profitability metrics, or investment style (growth vs. value). For example, a media-based index or communications sector ETF might qualify DJT stock, should other criteria be met.

Review and Reconstitution

Indexes are periodically reviewed, typically quarterly or annually. During this review, the index provider assesses whether any additions or deletions are necessary based on the eligibility criteria and the index methodology. 

• Adding new stocks: If a company meets the criteria and improves its ranking within the target market cap range (e.g., enters the top 3,000 for a large-cap index), it might be added to the index. 
• Removing existing stocks: Conversely, companies that no longer meet the criteria (e.g., market cap falls below the threshold) or merge with other companies might be removed from the index. 

ETFs With DJT Stock as a Holding

Data as of June 25, 2024.

Bottom Line on DJT Stock in ETFs

DJT stock could become a constituent in more indexes, and thus a holding in more ETFs, but only time will tell if Trump’s media company can continue to pass the necessary criteria. While a rules-based factor ETF could add a stock sooner, earning and maintaining a spot in a major stock index can be a tough climb for any new company.

Index providers meticulously assess a company's size, liquidity, financial health, and industry fit before granting entry. Only those that meet stringent criteria and demonstrate a track record of stability alongside significant market value have a shot at joining the ranks of these established indexes. 

While DJT stock may continue to attract short-term trader enthusiasm, its long-term prospects, and thus its viability to become widely held in ETFs, is yet to be seen.