Tesla founder and Time Person of the Year Elon Musk is an avid Twitter user, and who can blame him? He reportedly has a $0 advertising budget because his huge online following gives his brand all the exposure it needs.
And this was certainly proven last November when Musk, with a net worth of $291.3 billion, took to Twitter to ask his 63 million followers if he should sell 10% of his Tesla shares and vowed to comply with the results. voting. Within hours, more than 3.5 million people voted, with more than half saying he should sell. Result? Tesla shares fell 12%, the biggest drop in months, before rebounding 4.3%.
And this isn't the first time Musk's social media posts have had a significant impact on his company and the stock market as a whole. Three years ago, he tweeted that he had "financed secured" to privatize Tesla at $420 a share. The post sent Tesla stock skyrocketing more than 13%.
However, given the fact that there was no "deal", Musk and Tesla were fined by the Securities and Exchange Commission (SEC), and Musk had to step down as chairman. But the incident didn't scare him: Last May, Musk tweeted that Tesla's stock price was "too high" and dropped 10%, and in October he called Tesla's latest valuation "weird" on Twitter, and the stock jumped 12%. %.
GameStop is a recent example of how social media can exploit market activity and send shockwaves through the financial markets.
After learning that Wall Street hedge funds were betting on the collapse of a publicly listed gaming company, retail traders colluded on Reddit, agreeing to buy and hold GameStop shares in an attempt to drive up the price. And it worked: they pushed the stock up from $17.25 to a high of $347.51 before falling again to $52.40 a month later. As a result of the incident, traders suffered significant losses, and some hedge funds were forced to rethink their risk management measures.
But until the rules are in place, Musk and others in a similar position have a greater responsibility to carefully monitor and manage the information they share, not just for their own companies but for the wider market. according to Matt Smith, chief executive of global firm SteelEye.
