Brag House Continues Action to Protect Stockholders Against Potential Illegal Naked Short Selling

Rhea-AI Summary

Brag House Holdings (NASDAQ: TBH) has launched an investigation into suspected illegal naked short selling of its stock. The company observed several concerning indicators: an 80.79% stock price drop from $6.61 to $1.27 on April 1, 2025, unusually high trading volume nearly equaling the company's public float over multiple days, nine trading halts, and persistent failures to deliver shares. Key evidence includes trading volume reaching 3x the IPO share size, average borrowing rates exceeding 115% in April 2025, and discrepancies in beneficial ownership reporting. The company has alerted the SEC, FINRA, and Nasdaq, requesting immediate investigation. Despite these market challenges, Brag House continues to execute its strategic initiatives in gaming and college sports engagement, including a recent partnership with Learfield.

Positive

• Company is taking proactive steps to protect shareholder value by investigating potential illegal trading
• Strategic partnership with Learfield remains on track
• Business operations and expansion plans continue despite stock price volatility
• Company maintains strong focus on platform scaling and user experience enhancement

Negative

• Stock price suffered dramatic 80.79% single-day decline (from $6.61 to $1.27)
• Potential illegal naked short selling may be artificially suppressing stock value
• Unusually high borrowing rates (115%) indicating significant short selling pressure
• Multiple trading halts and circuit breaker triggers indicating extreme market volatility

Insights

Securities Regulatory Expert

Brag House's allegations of naked short selling warrant serious attention following 81% stock drop, but regulatory investigations typically yield limited results.

Brag House's announcement represents a significant escalation in their response to the dramatic 80.79% single-day stock collapse on April 1, 2025. The company has now formally requested investigations from three regulatory bodies—the SEC, FINRA, and Nasdaq—after identifying what they believe are telltale signs of illegal naked short selling.

The evidence they've presented merits attention: trading volume nearly tripled their IPO share count on April 1, triggering nine trading halts; appearance on Nasdaq's circuit breaker list for two consecutive days; extremely high financing rates averaging 115% to borrow shares; persistent failures to deliver; and discrepancies between reported beneficial ownership and DTC reports.

While these indicators can signal naked short selling, they're not definitively conclusive. High volume and price volatility can result from legitimate market factors, and settlement discrepancies have multiple potential causes. The company explicitly states they're unaware of any material undisclosed information that might explain the trading pattern.

Historically, regulatory investigations into alleged naked short selling rarely result in significant enforcement actions due to the difficulty in proving intent and distinguishing between illegal naked shorts and legal market-making activities. The SEC has been criticized for its limited enforcement in this area despite Regulation SHO implementation.

For shareholders, this development introduces regulatory uncertainty that could persist for months or years, potentially affecting trading patterns and liquidity. The company is clearly attempting to signal to the market that its fundamental business remains on track, particularly highlighting their Learfield partnership, but the stock will likely trade under the cloud of this investigation for the foreseeable future.

NEW YORK, May 14, 2025 (GLOBE NEWSWIRE) -- Brag House Holdings, Inc. (NASDAQ: TBH) (“Brag House” or the “Company”), the premier Gen Z engagement platform that operates at the intersection of gaming, college sports, and social interaction, today announced an update on its investigation into recent trading activity in its stock. With assistance from its outside advisors, the Company’s investigation has identified preliminary data suggesting the Company may have been the subject of illegal naked short selling. Accordingly, today the Company sent letters to the SEC, FINRA, and Nasdaq regarding these preliminary findings and requested they open an immediate investigation into the suspected trading activity.

Naked short sales take time to verify, but preliminary financial indicators cause the Company to believe that abusive naked short selling may have occurred. Naked short selling is illegal and damages stockholder value in a company by artificially pushing its stock price down. Common indicators of abusive naked short selling include unusually high trading volume, high financing rates to borrow stock, and persistent failures to deliver that culminate in significant downward pressure on a company’s stock price.

On March 31, 2025, the Company’s stock closed at $6.61 and subsequently closed at $1.27 on April 1, 2025, an 80.79% decrease in the Company’s stock price in one trading day. The Company has identified a large trade on April 1, 2025, that the Company believes may have triggered subsequent naked short selling, potentially by certain funds and traders. Moreover, based on settlement data the Company received from DTC, the Company did not see anywhere near the quantity of the settlement of shares that it expected to see based on the large number of shares that traded on April 1, 2025. The Company believes this lack of settlement of shares may be evidence of naked short selling.

On each of April 1, 2, and 3, 2025, the total volume of shares traded nearly equaled the Company's public float. Specifically, on April 1, 2025, the trading volume was nearly three times the size of the shares of its initial public offering. Because of this unusually high trading activity, there were a total of nine trading halts in the Company’s stock on April 1, 2025. In addition, the Company appeared on Nasdaq’s circuit breaker list on both April 1 and April 2, 2025. Meanwhile, financing rates to borrow Brag House’s stock averaged over 115% in the month of April 2025 making it extremely expensive to borrow the Company’s stock which is often an indicator of a high demand to borrow the stock. Brag House stock was also subject to persistent failures to deliver in the second half of March and the first week of April 2025.

The Company has observed persistent discrepancies between the shares that are reported as beneficially owned by non-objecting beneficial owners (NOBOs) and objecting beneficial owners (OBOs) to Broadridge and other similar institutions and the shares that are reported to the Depository Trust Company. While minor occasional discrepancies can result from reporting delays or clerical errors, persistent discrepancies in beneficial ownership can imply that there may be fictious shares circulating in the market. The presence of fictious shares in the market would artificially increase the supply of shares available for short selling and may help facilitate naked short selling.

Brag House is not aware of any material undisclosed information or corporate developments that contributed to the decline in its stock price or unusually high trading volume. Taken together, the Company believes that the pricing volatility in the Company’s stock, unusual trading volume, high financing rates to borrow the Company’s stock, multiple halts to trading, and persistent failures to deliver form a compelling pattern indicative of artificial selling pressure and suggests the presence of illegal naked short selling.

Despite the turmoil in the Company’s stock price, Brag House is continuing to execute on its strategic initiatives to redefine digital engagement for casual college gamers and the brands that seek to connect with them, including our recent announcement of our partnership with Learfield. The Company continues to focus on scaling its platform, enhancing user experience, and expanding its data-driven brand partnerships to create deeper, more meaningful connections with Gen Z. The Company believes its strategy is working as Brag House is expanding its platform’s capabilities, refining its data-driven insights for brand partners, and fostering a digital community that resonates with casual gamers. Brag House remains confident in its strategic plan and the various initiatives it is executing on to create stockholder value.

A copy of the form of letter sent to the SEC, FINRA, and Nasdaq was filed with the SEC as an exhibit to the Company’s Form 8-K filed on May 14, 2025.

No stockholder action is required at this time.

About Brag House

Brag House is a leading media technology gaming platform dedicated to transforming casual college gaming into a vibrant, community-driven experience. By seamlessly merging gaming, social interaction, and cutting-edge technology, the Company provides an inclusive and engaging environment for casual gamers while enabling brands to authentically connect with the influential Gen Z demographic. The platform offers live-streaming capabilities, gamification features, and custom tournament services, fostering meaningful engagement between users and brands. For more information, please visit www.braghouse.com.

Forward-Looking Statements 
Certain statements in this announcement are forward-looking statements. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. These statements are subject to uncertainties and risks including, but not limited to, expectations related to the investigation of potential naked short selling, including the Company’s analysis, its ability to take appropriate corrective action, or any potential investigations by regulators and other risk factors discussed in the “Risk Factors” section of the Company’s filings with the SEC. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations that arise after the date hereof, except as may be required by law.

Media Contact:

Fatema Bhabrawala
Director of Media Relations
fbhabrawala@allianceadvisors.com

Investor Relations Contact:

Adele Carey
VP, Investor Relations
ir@thebraghouse.com

FAQ

What caused TBH stock to drop 80.79% on April 1, 2025?

Brag House suspects illegal naked short selling caused the dramatic price drop, with trading volume reaching 3x the IPO share size and multiple trading halts. The company is investigating a large trade on April 1 that may have triggered subsequent naked short selling.

What evidence suggests illegal naked short selling of TBH stock?

Key indicators include unusually high trading volume, 115% financing rates to borrow stock, persistent failures to deliver shares, multiple trading halts, and discrepancies between reported beneficial ownership and DTC records.

What actions is Brag House taking against suspected naked short selling?

Brag House has sent formal letters to the SEC, FINRA, and Nasdaq requesting immediate investigation into the suspicious trading activity, and filed these communications in an 8-K form on May 14, 2025.

How many trading halts did TBH stock experience on April 1, 2025?

TBH stock experienced nine trading halts on April 1, 2025, and appeared on Nasdaq's circuit breaker list on both April 1 and April 2, 2025.

What is Brag House's current business strategy despite the stock volatility?

Brag House continues to focus on scaling its Gen Z engagement platform, enhancing user experience, expanding data-driven brand partnerships, and executing strategic initiatives including its partnership with Learfield.