New headache: Social media and stock manipulation
Not too long ago, Wall Street was captivated by the notion that Twitter-based sentiment indicators could be used to predict, or at least inform, stock movements. A couple of incidents recently have demonstrated that, while the jury is still out on such indicators, Twitter can without question be used to manipulate stock prices.
Two thinly traded Nasdaq stocks tanked in the wake of Tweets that purported to be from research outfits. In both cases the Tweets delivered negative information. While the Tweets were fakes, the damage was significant. According to Reuters, "Sarepta Therapeutics shares plummeted 9.9 percent in a matter of seconds after someone with the Twitter user name @citreonresearc alleged improprieties at the company. The drop mirrored a similar incident on Tuesday, when Audience Inc. fell more than 25 percent following tweets that at a glance looked to be from Muddy Waters, another short-selling firm."
This is not an insignificant development for the SEC. It has to start thinking about social media in an enforcement context. Hopefully, it will not end up behind the curve on this.
- here's the article