The Social Media Effect: How Viral Posts Have Influenced Stock Prices
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Article explains how social media hype drives stock manias, citing Parle Industries, Vishal Mega Mart, Bombay Oxygen Investments and GameStop as meme driven rallies.
The Meme Market Effect: How Social Media Fuels Stock Rallies
As a large section of the Indian population is being connected with social media and spends substantial hours on it each day, they have become an important platform to spread information or misinformation and shape narratives among the audience. The influence of social media can’t be denied, given that memes and trends become the most effective way to spread messages among young generations.
But some misuse the technology to influence or manipulate young investors for their own wrong motives. There are many instances in the past that viral trends on social media platforms led to investment mania in particular stocks, shooting up their prices to unimaginable levels, not aligning with fundamentals and financials.
Let’s go through the recent cases where investors pumped the stock just because they were being influenced by social media hype or trend.
1. Parle Industries Vs Parle Products
The name similarity has pushed Parle Industries’ stocks to 10 percent gain in the two consecutive days. It all began when a video of Indian Prime Minister Narendra Modi gifting Italian Prime Minister Giorgia Meloni a packet of chocolate-caramel candy ‘Melody’ went viral on social media. Parle Products is the maker of this Indian candy. Since Parle Products isn’t a listed firm, investors swamped onto the same name company Parle Industries, a real estate firm, whose shares surged hit the back-to-back upper circuit of 5 percent.
2. Vishal Mega Mart Trend
Last year, memes related to Vishal Mega Mart security guard had gone viral, which became a nationwide trend.
The trend started when videos of Vishal Mega Mart security guards making reels and showcasing their relaxed lifestyle went viral, attracting significant attention. Memers then shared these videos, dubbing it “Ek hi sapna – Vishal Mega Mart security guard.” This led to a nationwide sensation.
This hype led investors to pile up stocks of Vishal Mega Mart, as shares surged 16 per cent during the hype.
3. Covid Comes As Boon For Bombay Oxygen Investments
Bombay Oxygen Investments’ shares rose sharply during the Covid-19, when the oxygen crisis hit the hospitals, increasing the demand for oxygen cylinders. Investors had made a bet on Bombay Oxygen Investments, believing that its business would boom following the sharp demands.
Shares grew over 130 percent in less than 3 weeks on social media, where posts of the oxygen crisis went viral.
4. Gamestop Tale Is A Wall Street Case Study
GameStop is a stock that caught the social media hype, leading investors to flock in massive numbers and driving up the prices.
In 2021, people began flooding content related to GameStop through memes, posts, videos, suggesting that big hedge funds had oversold stocks and had been undervalued.
GameStop stock went from $17 per share in early January 2021 to over $480 at peak intraday levels after that month.
Social media effect worked, as investors rushed to join the rally. It became a self-feeding cycle called a short squeeze. Moreover, Elon Musk tweeted ‘GameStonk’, catapulting the prices sharply after the tweet.
GameStok case became so popular and legendary that a proper term called meme stock was born.
The above examples show how social media’s narrative and concerted campaign can turn around any faltering stock and create an unrealistic rally.
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