Courting the ‘finfluencer’
Getting to know the ‘mayors’ of US financial social media can pay real dividends, says Tom Brown
Social media influencers may help determine the latest fashions and whose album goes gold, but are ‘finfluencers’ – individuals opining on finance on Reddit, YouTube, TikTok, and the like – ever likely to move your company’s stock price?
The jury is still out, but the GameStop and AMC phenomenon has given some Investor Relations Officers (IROs) pause for thought. Followers of social media drove these stocks to dizzying heights in January 2021, buying when hedge funds shorted.
Some retail investors enthusiastically buy into dips in so-called ‘meme stocks.’ In early February 2022, when the stock price of Meta (Facebook’s owner) plunged after a disappointing quarterly report, investors on Fidelity’s online platform placed four buy orders for every one sell order.
Increasingly, US retail investors are a force to be reckoned with. As a percentage of total shareholdings, retail ownership increased to an average of 18.5 percent through the end of 2021, up from 14.2 percent in 2020 and 13.9 percent in 2019, according to data from IHS Markit.
What’s more, a CNBC survey found that social media was the most popular source of investment ideas for the 18-to-34-year-old demographic, with 35 percent of them using social media to look into possible investments.
As Sue Ennis, head of investor relations at Hut 8 Mining, a digital asset mining company based in Toronto, told the Canadian Investor Relations Institute’s newsletter: “You have to respect and get ready to leverage social media and the huge, decentralized hedge fund that is the Reddit groups, the Robinhood traders, and the WallStreetBetters.” She notes that the Hut 8 group on Stocktwits has 16,000 followers.
Some IROs monitor social media, while others go further, actively talking with the chief gurus – or mayors – of these groups, granting them interviews and helping shape the investment stories they tell.
Here are a few of the key players in the US:
- Stocktwits – A Twitter for the stock-trading world, this is a real-time social network for investors and traders; it has over six million registered users.
- WallStreetBets – Also known as r/WallStreetBets, is a user-created area of interest on Reddit with over 11 million users. Founded in 2012, this Reddit community (or subreddit) is widely considered the force behind GameStop’s meteoric rise from US$20 to US$480 per share in a single month last year.
- Robinhood – A commission-free trading platform via mobile app, Robinhood debuted a new service in early 2022 called ‘First Trade Recommendations’ to help newcomers break into the investing world. Robinhood is the platform of choice for many r/WallStreetBets traders.
- YouTube – Has a wealth of different trading channels, many of which have enormous followings. Warrior Trading, for instance, had 958,000 subscribers as of late February.
An IRO like Hut 8’s Ennis would argue that knowing the names of the platforms isn’t enough. What IROs need to learn is who is the chief decision-maker and how can that social media guru be reached? Personal relationships can be critical for clearing up mistakes and ensuring that your company’s story is being told accurately.
New ways of communicating
Unlike traditional buy or sell-side analysts, the mayors of social media act fast. Scheduling an appointment a week in advance usually won’t fly. What’s often better is cultivating relationships with them and then picking up a phone.
Typing out answers to online queries can sometimes lead to problems because these online conversations can be taken out of context. “Retail shareholders often copy and paste our answers and post them elsewhere,” Laura Kiernan, CEO of High Touch Investor Relations, told the Wall Street Journal in a February 7th article. So instead of emailing investors, Kiernan speaks to them over the phone. “It can be kind of whack-a-mole,” she said.
Of course, actively engaging with social media influencers is not for every IRO. Many companies are rarely mentioned on Stocktwits and r/WallStreetBets, and for them retail investor groups are hardly moving the dial.
Whether you choose to cultivate close relationships with ‘finfluencers’ or simply keep them on your radar, knowing how to find key individuals on social media can be a smart move.
If you’d like to know more about how Bladonmore could help you communicate with social media influencers, please get in touch.