Beyond Reddit, day traders turning social media platforms into squawk boxes

Federal Signal

28/01/2021 17:14

By Imani Moise
    Jan 28 (Reuters) - Social media chatrooms are beginning to
resemble the squawk boxes on old-fashioned trading floors, as a
new generation of retail traders continues to gain influence
over the stock market.
    While attention has focused on the Wallstreetbets Reddit
page that helped send shares of GameStop Corp  GME.N  and AMC
Entertainment Holdings Inc  AMC.N  soaring, thousands of
"amateur" investors have also been congregating on Facebook,
Instagram, WhatsApp, Signal, Telegram, Discord, Clubhouse, Slack
and other platforms to trade tips away from the public eye,
posts shared with and seen by Reuters show.
    For example, Rapper 21 Savage's manager, Stone Mound Meezy,
started a Clubhouse room on Wednesday to celebrate earning
$40,000 in GameStop options. It quickly filled with more than
1,200 participants who encouraged newbies to jump into other
investments, including Nokia Oyj  NOKIA.HE  and
cryptocurrencies.
    "If I make $100K because of this goofy *ss room ... OOOOH
WEEEEE," Meezy wrote after investing in Nokia at their
suggestions and seeing he was in the money. 
    In another Clubhouse room, venture capitalist Mark Monroe
was urging 2,500 members to stay away from "meme stocks" that he
believed could crash by the end of the week.
    At the same time, on Instagram, 23-year-old Albert Sampouw,
a.k.a @kevin.trades, and his partner, Mihir Sukthankar, invited
their combined 160,000 followers to join a Slack group after
posting a screenshot of a 563% gain on an AMC investment.
    The pair post watch lists and stock opinions on their page
for free, but charge up to $2,000 to join a community of 8,000
members on Slack called Traders Circle X, where they post alerts
on when to buy a particular stock.
    "I don't want to call it advice because we're not
professional advisors," 19-year-old Sukthankar said. "But the
free content that we're putting out, a lot of people in the
trading community find value in."
    
    GENERATIONAL SHIFT 
    The idea of using social media for investing is far from
new. Popular platforms from the 2000's include Bogleheads, Yahoo
Finance and StockTwits.
    The recent phenomenon takes the medium further because of a
generational shift where people feel more comfortable touting
investments online, as well as trading apps like Robinhood
geared towards first-time investors, experts said.
    In addition, the new influencers see themselves as rebels
and educators leading disenfranchised communities to economic
freedom, rather than greedy tipsters looking for a quick buck.
    "It's a collaboration, and that's where the magic happens,"
said Jannick Malling, co-founder of Public, a trading app that
combines brokerage services and social media.
    The surge of video retailer GameStop started when Ryan
Cohen, the founder of popular pet-products site Chewy, faced off
against hedge-fund managers who had shorted the stock. The
broader Reddit group decided to support GameStop and a few other
stocks, battling what they characterized as a corrupt system run
by wealthy "professional" investors.
    Hedge funds have had to backtrack short positions in recent
days as GameStop's price has soared ever higher.
    As institutional players and regulators start to talk about
the need to investigate the role of social media in the stock
price leaps, deeper battle lines have been drawn.
    It is Reddit against The Man, supporters say.
    Supporters like entrepreneur Mark Cuban have touted the
Wallstreetbets success as a counterweight to high-speed trading
firms that have technological advantages against individuals.
    "I LOVE LOVE what is going on," he wrote on Twitter on
Wednesday night.
    The retail victory could be fleeting. If stocks promoted on
Reddit fall in a serious way, plenty of amateur investors could
get badly burned. For now, they are enjoying their moment.   
    In his Clubhouse room on Wednesday, Meezy said multiple
times that he was not an expert. When offering the ticker to
Nokia, he accidentally suggested the code for Nikola.
    Followers laughed off the mistake and stayed bullish.
    "It's only day three of the retail extravaganza," one said.

 (Reporting by Imani Moise
Writing by Lauren Tara LaCapra
Editing by Sonya Hepinstall)
 ((Imani.Moise@thomsonreuters.com; +13322191733;))