Elon Musk tweets, the stock market cheers - or trembles, depending on the case. We highlight the most spectacular cases and how investors should deal with them.
Elon Musk caused a sell-off on the crypto markets in recent days. The Tesla boss hinted on Twitter on 16.05.2021 that the electric carmaker could sell its Bitcoin holdings or may have already sold them. He had already caused a stir with a tweet on Thursday night, causing the market to plummet. The reason was that Tesla no longer wants to accept Bitcoin as a means of payment and cited environmental concerns in view of its high power consumption. This was enough to send the Bitcoin price plummeting.
Elon Musk is one of the richest people in the world, with a fortune that at times exceeded $200 billion. It is true that he lost first place in Forbes' global ranking again due to the decline in Tesla's share price in https://exnesslatam.com/calendario-economico/. But that does not diminish his public influence. His tweets to his approximately 50 million followers are downright notorious. The founder of Tesla and SpaceX regularly shakes up share prices with his statements on Twitter.
Other spectacular cases: Signal Advance, GameStop and Bitcoin
Among the most curious incidents is the jump in the share price of the company Signal Advance. After Musk sent the terse message on the afternoon of 7 January 2021. "Use Signal", the share price exploded. On the day of the tweet, it closed at US$3.76, only to reach US$70.85 within the next two days. But Musk was referring to the messaging service Signal, which is not even on the stock exchange. Advance Signal, on the other hand, is a small-cap stock in the biotech sector. As word of the mistake spread, the price collapsed.
Then came the GameStop case. You may remember: a swarm of small investors organised themselves on the social platform Reddit. We reported on it at the time. They moved out to defy hedge funds that were speculating on a falling share price of the computer game chain. Musk expressed goodwill towards the action on 26 January 2021 with a casual "Gamestonk!!!" and a link to the relevant Reddit community. GameStop's stock price began its rocket-like ascent before then, but Musk's tweet arguably accelerated it.
And on 19 February 2021, Elon Musk caused the cryptocurrency Bitcoin to jump with a tweet. Its price rose above the 53,000 US dollar mark to a new record high on the same day. He called it "a less dumb form of liquidity than cash". He was alluding to the zero interest rate policy of the US central bank and a possible threat of inflation.
Caution is advised when trading on tweets and rumours
You may now be asking yourself: can the tweets of Musk and other high-reach Twitterers be used profitably? In principle, yes - some day traders do just that. But anyone who plays with this idea should be aware of the risks.
Price-relevant tweets are usually quickly reflected in the price of a share. And once a movement is underway, it can end at any time. There is a risk of entering near the high.
Has the price not moved yet? Then it might not move at all - or not in the expected direction. This danger is particularly imminent with messages that leave room for interpretation.
In general, there can be hidden interests behind tweets and other posts. Perhaps someone just wants to create more demand for a share in order to sell his own position at a higher price.
So the whole thing is not as easy as it looks in retrospect. However, these incidents also hold a lesson for long-term investors: a sufficient diversification in the portfolio ensures a peaceful sleep despite fluctuations in individual stocks.
What do you think of Elon Musk's Twittering? Have you perhaps already profited from it yourself? Let us know in a comment!
Conclusion:
Price-influencing tweets by Elon Musk are not uncommon.
In the meantime, this has brought him trouble with the US Securities and Exchange Commission (SEC).
Recently, an investor even filed a lawsuit demanding damages.
Trading on tweets is tempting, but involves significant risks.
Eleena Timmons