More than 46 million people follow Elon Musk on Twitter and many, it seems, have trading accounts.
“I kinda love Etsy,” tweeted Musk a few weeks ago: the stock promptly surged 8 per cent. On the same day, he tweeted “Gamestonk!” and linked to Reddit’s WallStreetBets forum. The next morning, GameStop’s shares almost doubled in price.
More recently, he dubbed Dogecoin – the cryptocurrency which uses a dog meme as its logo and which was invented as a joke – the “people’s crypto”, prompting the price to go bananas. He was at it again last week, saying he had bought Dogecoin for his baby “so he can be a toddler hodler” (hodl is slang for holding rather than selling cryptocurrency). The price of Dogecoin, already up more than 1,000 per cent this year, popped again.
Musk may be joking around, but he knows well his tweets result in inexperienced traders doing dumb things. Last month, the price of penny stock Signal Advance went bonkers after Musk recommended messaging app Signal, a completely unrelated company.
One must ask: is it really funny that many people are going to lose a bundle by piling into the likes of Dogecoin, whose market capitalisation topped $10 billion last week?
The Financial Times recently reported on one woman who lost about £2,500 on Gamestop, whose price has fallen 85 per cent. "That is rent for the month, it is bills," she said. "I don't know how we'll recover."
It also referred to another GameStop investor, a young accountant who moved his $69,000 Vanguard retirement account into GameStop shares; within days, he had sold after losing $42,000.
Stories like this will multiply in the coming weeks and months. Musk should recognise that his carefree tweets can be consequential.
