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Open thread: Is Stock Twittering a Giant Pump-n-Dump?

June 24, 2009

twitter_logo_headerTwitter is popular, there is no doubt about that. In fact, the top 20 people that twitterers follow have at least 1 million followers each. Oprah twitters, Ashton Kutcher twitters and even President Obama twitters.

Now there is a rising trend to use Twitter to get stocks tips. Groups have formed such as StockTwits to share ideas on stocks in real time. But, does this unregulated and unchecked platform pose a risk of becoming a giant Pump-n-Dump network?

Recently, Barron’s wrote about this concept, albeit cautiously:

Already, Twitter influences stock and options trading.

“Since brokers have to save instant messages and e-mail, but thus far have no such mandate for tweets, well, you can guess that the far more discreet traffic is on Twitter,” says Jon Najarian, of optionmonster.com. It was on Twitter that Najarian first heard last week’s news that Matrixx Initiatives ‘ (ticker: MTXX) Zicam nasal spray allegedly damaged people’s sense of smell. “Guys started tweeting and the stock dropped from $19 to $13,” he says. Matrixx has since pulled Zicam off the market. The stock was recently at about $5.55.

So, is this something to worry about? Would you trust stock info/tip from a tweet?

Comments encouraged….

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Written by Andrew Horowitz · Filed Under Markets, Media 

Comments

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5 Responses to “Open thread: Is Stock Twittering a Giant Pump-n-Dump?”

  1. anthony on June 24th, 2009 10:24 pm

    Are you for real? You dont even read the logic of your own post You falsely attempt to inflame the fact there was an attempted motive into to the nature of a pump and dump scheme assertion and apply it with what was in fact a mere public health announcement release by FDA on the dangers of the nasal spray recall that got posted on StockTwits-no more. I saw it and was busy with my trades meaning no one suggested doing anything as far as raiding it. If one got that idea fine I overlooked it which means it was never even hinted at. It was up to the viewer.

    Perhaps it reveals more of your outlook on this sort of thing as isolated to message mediums but common place as a result of your own cynicism and lack of knowledge of what we do there. Why is that? Why don't you research the real manipulators of MSM such as Jim Cramer and Warren Buffet et al. on that freak circus CNBC. I suppose you would have us trust them instead of the hard honest work we do on StockTwits, i.e. share ideas with much hard sought due diligence.

  2. Andrew Horowitz on June 25th, 2009 12:35 am

    –

    It was a question, not a statement

  3. itenginerd on June 24th, 2009 8:42 pm

    If yer dumb enough to get snowed by Twitter, yer gonna get snowed -somehow-. That includes blindly following advice by Cramer, or the Gorilla, or SeekingAlpha, or ONN, or the Fool.

    The idiot isn’t the one that speaks, it’s the one that listens. And IMHO gets what he deserves…

    Do your own work or find somebody that does.

  4. snoopyjc on June 25th, 2009 2:03 am

    Yes, I follow some very impressive traders on twitter, including the expert currency trader Ashraf Laidi (@alaidi) and Brian Shannon (@alphatrends) and their advice has helped me a lot. Of course, I do my own charts, etc, but it helps to be able to bounce ideas off of these experts.

    The problem with StockTwits is that anybody can post anything, so the amount of tweets gets pretty high, but they have a "recommended" list to quiet that down considerably. In order to avoid Pump/Dumps, they filter out all "penny" stocks. Actually, the thing about StockTwits I like the most is the SPX/INDU/COMPX chart they have there that is updated (which was actually my idea).

    I also post my trades there publicly, which helps to keep me disciplined (e.g. I don't hide my losers).
    –joe

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