The stage is being set for the “Mother of All Short Squeezes” – meaning potentially huge losses for a certain group of investors who bet against Donald Trump’s social media company, On The Money has learned.

Truth Social shares trading under the symbol “DJT” are up nearly 200% this month alone, a rise that is being tracked by several betting odds indicators, such as Polymarket, predicting a Trump presidential victory.

On Monday, DJT shares rose 22%, while Polymarket odds of a Trump victory next week reached 66%, an all-time high.

People who owned the shares made money. This does not apply to sophisticated investors, known as short sellers, who have bet against the stock. “Short interest” or negative bets on DJT have soared since the company went public earlier this year and announced significant operating losses.

The short sellers have had a tough time and the worst may yet come.

Bob Sloan, the founder of S3 Partners, a data analytics firm, told On The Money that the short squeeze potential in shares of Truth Social is similar to what happened with GameStop – the meme stock darling touted by Keith Gill, also called ‘Roaring Kitty’. .”

Like that troubled company, Truth Social doesn’t look great on paper. According to its second-quarter results, the company lost $16.4 million, and its prospects for making money in the future look bleak.

But there is a lot of emotion around DJT, just like there is in GameStop. The GameStop crowd believed they were doing God’s work and sticking with supposedly evil short sellers who were betting on a company’s survival.

The crowd behind DJT includes the MAGA faithful, the same types who visited MSG for Trump’s weekend rally, and believe the world is out to get Trump, who has survived multiple assassination attempts and indictments.

Sloan says DJT’s shorting potential is further increased by the fact that insiders like Trump own so many shares. Only Trump owns 57.3% of the company and has not sold any yet. The short interest, or percentage of short positions, is quite high: 17% of all remaining shares. That means more than $560 million is at risk if there is significant pressure.

“So far the shorts are holding up,” says Sloan, noting he sees little coverage even as Election Day approaches. “That said, we see DJT as a squeeze candidate.”

If Trump loses? The exact opposite could happen; people could sell their shares, giving the short sellers a nice payday after November 5.

If he wins, the shorts will most likely capitulate and start covering en masse. The MAGA holders make some money and Trump gets even richer. According to Forbes, this month’s DJT wave has already increased the billionaire real estate developer’s net worth by $3.7 billion.

In a short sale, traders borrow a stock and then sell it immediately. They are betting that the stock’s price and earnings will fall if they “cover” or replace their loans at a lower price than they were sold at.

However, if the stock price rises significantly, the short positions can come under pressure as they have to replace their loans at increasingly higher prices, causing large and sometimes existential losses. If they come under a lot of pressure, you get a “MOASS” – leading to big losses in the short selling community and perhaps one or two hedge funds going bankrupt.

From a fundamental standpoint, it’s hard to see how even a Trump victory will help drive significant traffic to Truth Social, which will make a meaningful difference in the shaky balance sheet and competition for companies like Facebook and X.

But that’s not how short squeezes often work. The emotion surrounding Trump’s improving poll numbers is enough to send stocks soaring and crush short sellers on the receiving end of the squeeze.

Recall: The GameStop MOASS drama caused one major hedge fund, Melvin Capital, to fail. Other sophisticated investors were similarly crushed. A movie was made, “Dumb Money,” about how small investors rallied behind their prophet Roaring Kitty to buy up shares of the troubled video game company that Wall Street had massively bet against.