It is important for investors to be aware of the potential influence of social media on the stock market and to carefully evaluate the information they encounter before making investment decisions. If not, it can have dire consequences for stock prices.

As we will see below, retail investors can coordinate action on social media platforms such as Reddit and influence the price of a stock, individuals can use social media to communicate with followers and provide information that can affect a stock price, and social media can also be a source of misinformation and fake news that can affect prices.

Here are three times social media users did exactly this.

Kylie Jenner and Snapchat

In February 2018, Kylie Jenner, a reality TV star and social media influencer, tweeted that she no longer used Snapchat, stating: “sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.” The tweet was widely circulated on social media and led to a significant drop in Snapchat’s stock price, as investors were concerned about the potential impact of Jenner’s tweet on the platform’s user engagement and advertising revenue. Jenner’s tweet was seen as particularly significant because she has a large and influential social media following, particularly among young people.

According to reports at the time, Snapchat’s stock price fell by around 6% within hours of Jenner’s tweet being posted. This represented a decline of about $1.3bn in the company’s market capitalization. This is a textbook example of how powerful social media can be when it comes to stock prices. Investors should always keep an eye on what people are saying about their stocks on social media, as even a single tweet from an influential figure can have major financial implications.

Also, always remember that if you have questions about stocks or investing, such as what is deflation, then it’s wise to use a reliable source to get your information!

Steve Jobs fake tweet

On August 24th, 2013, a fake tweet was sent from the Associated Press’ Twitter account claiming that Steve Jobs, the co-founder and former CEO of Apple, had died. The tweet was quickly disseminated on social media and caused a brief but significant drop in the stock market. The Dow Jones Industrial Average fell by more than 140 points within minutes of the tweet, and the S&P 500 and NASDAQ also declined. The tweet was later revealed to be the work of hackers, and the Associated Press quickly issued a statement denying that the tweet was true. The stock market recovered soon after the truth was established, and Apple’s stock price ultimately ended the day slightly up. The incident highlights the potential for fake news and misinformation on social media to have real-world financial consequences.

Twitter is now under new ownership and the owner, Elon Musk, has been busy introducing some big changes. Read about the many publicized changes to the blue tick and more.

GameStop short squeeze

The GameStop short squeeze was an event that occurred in January 2021, and involved retail investors trading heavily on the stock of the video game retailer GameStop. This led to a dramatic increase in its stock price, causing huge losses for institutional investors who had bet against it through a process known as ‘shorting’.

In essence, ‘shorting’ involves borrowing shares to sell them at the current market price. The hope is that the stock will later drop in value and the investor can then buy the same amount of shares back for a lower price, pocketing any difference as profit. However, when the opposite happened with GameStop, retail investors began buying up shares, driving the price up sharply. This caused a ‘short squeeze’, forcing institutional investors to buy back their shares at higher prices to minimize their losses.

The GameStop short squeeze was especially significant for retail investors, as it demonstrated that they had the power to push back against large institutions and make money from the stock market. This event has been seen as a powerful example of collective action and is likely to become a part of stock market history. It is still making news today as this recent article on short-sellers from the Financial Times shows.

Interestingly, the GameStop short squeeze also had an impact on other stocks that had large amounts of institutional investors betting against them, such as AMC Entertainment and BlackBerry. Retail investors began buying up these stocks as well, and the resulting rallies had a similar effect and squeezed out institutional investors.

These three instances demonstrate how influential social media users can be when it comes to affecting stock market movements. By creating hype around certain stocks, they have the potential to drive share prices either up or down. Investors and the public alike need to stay informed about what social media users are saying to make better investment decisions.