The government announces a 15% anti-dumping duty on a commodity, raising its price in the domestic market, and the company’s share price that makes the product jump. Suppose, before the declaration of duty, the brother of the daughter-in-law of the minister concerned had bought a large number of shares of the company and sold them after reacting to the share price, then what would be the reaction of the world? #InsiderInformation and #MarketManipulation will trend on Twitter.
Let’s say news comes that a middling company is about to be acquired by a turnaround superstar, its share price rises, news of the acquisition becomes a false alarm, the price drops and it turns out that whoever pitched the news A neat pile of shorting thi stock (a short sale is one in which you sell a stock you don’t own, hoping that by the time you have to deliver the shares, the price will drop – when If the price was higher then you sold and bought the stock at the lower price to make good on delivery (the difference between the sell and buy prices is your profit). This would also transparently qualify as market manipulation.
What if this sort of thing was done by a social media star like Elon Musk, who has 93 million followers on Twitter (by some estimates, 23% of them could be bots). Musk announced his intention to buy Twitter, valuing the company for $44 billion, at $54.20 per share (in American pop culture, 420 is a reference to cannabis, and Musk likes his stoner credits). Twitter shares traded at $39-40 in late March through early April. After Musk announced that he owns a 9% stake in Twitter on April 4, the stock soared to more than $50 a piece.
Since then, Musk has been tweeting statuses and second thoughts, the latest Twitter has to prove that automated accounts constitute less than 5% of his users. Twitter’s price has come down just above $38. Speculation is high that Musk will either withdraw from the deal or demand a valuation lower than the $54.20 per share he originally proposed for the acquisition. The Twitter board itself is under pressure to accept the low valuation, after retracing the knocks that the share price has taken.
In India we celebrate unity and diversity. The creator, protector and destroyer of the universe is worshiped individually and combined into a transcendental entity with a skillful roll of the spiritual pin. It may be okay on a cosmic level. But, in the stock market, is it okay, in the era of meme stocks, to play the role of creator, protector and destroyer of value for an individual, especially when he stands to make financial gains from such divine license?
Musk doesn’t do much loose change in his crypto wallet. His wealth is in his Tesla stock. It must sell shares of Tesla to finance its Twitter acquisition. Tesla shares have tumbled on this prospect. China, where Tesla has a major production center and expects its biggest market, has raised questions about Twitter’s permissive stance on massively bashing China on the platform. Politics in America, especially regarding abortion, is about to get vicious. Twitter will be a battleground and target in the process. There are good reasons for a businessman not to push himself into the line of fire.
Musk may withdraw from Twitter deal. Or he can move on, if he gets a bargain. Either way, a little bird tells us that market regulators have a big lesson to learn about the damage done to ordinary investors by big social media influencers who only worship one or more members of the holy trinity. But don’t try to play one, leave all three alone.