Talking up stocks is as old the stock market. So is there really anything new or different in overly-confident stockholders or crypto investors taking to Twitter to talk up their primary investments?
As far back as 1888, the Financial Times came to market with the specific mission of neutralising fake news put out by vested interests. Such reports, the FT claimed, were set out in self-published journals for the sole purpose of pumping up stocks above fair value to the benefit of early adopters or directors and to the detriment of long-term public investors.
As an editorial entitled "Unsavoury promoters" in the March 16, 1888, edition noted:
We think that a man is entitled to be described as an "unsavoury promoter" when he brings out a scheme without taking the pains to make any investigation on the subject, except as to the amount of remuneration for his personal services in the matter. We think that a promoter may be described as "unsavoury" if, being a newspaper proprietor, he lends his columns to the wild schemes of unprincipled adventurers simply because, in one form or another, he is rewarded by a quid pro quo.
We think that "unsavoury promoters" include those editors and proprietors of papers who associate themselves with joint stock enterprises, and regulate their laudation or their censure not by the merits of the schemes, but by the amount of stock n their hands or in the hands, of their nominees, which they desire to unload upon the too confiding public -- who use their journals, not for the protection of the public, but for the forcing of fluctuations in stocks to meet their personal ends as speculators, with an utter disregard of the sufferings of those who lose the differences which they so unscrupulously pocket.
It is one of the objects of the Financial Times to expose and denounce this sort of thing, and ample evidence is in our possession to bring home the charges. Our operations are at present delayed by the difference between evidence which would satisfy any man of business, and the more technical proofs which would be requisite in a court of law, to support a plea of "justification".
So if fake or misleading news put out by conflicted parties is nothing new, perhaps what is new is the counter propaganda deployed (mostly on social media or self-publishing platforms) by stock and crypto devotees for the purposes of neutralising fair criticism.
Question the merits of Tesla -- no matter how logically or fairly -- and as a journalist, analyst or pundit, you will expose yourself to the ire of thousands of ferocious Tesla fanboy Twitter accounts. The same goes for any other faddy corporate stock or crypto coin. See as an example TrollyMcTrollface's analysis of how the Ripple army -- an online collective dedicated to supporting blockchain-payment company Ripple and its related XRP cryptocurrency -- weaponises social media accounts to fend off criticism of their vested interest.
To be fair, sometimes the counter-criticism is just. A fact or a perspective may have been overlooked by the writer who then stands corrected to the benefit of all concerned. As long as the interaction is logical, respectful and informed, it should always be welcomed. And generally is. This is the reason why newspapers print readers' letters pages and why most journalists are encouraged to engage with commenters.
How online propaganda squads work
But the reality of today's counter-criticism is very different. More often than not it is tribal, reactionary, abusive, instinctive and organised (or at the very least organised to look organic). Other times it is unofficially rewarded or encouraged by the companies/ventures in question. Even more frequently, it reveals itself as ignorant of the facts and arguments made in the story (possibly because the arguments were never properly comprehended and/or read at all).
Critics' points are taken out of context or challenged over semantics. A classic technique focuses on tearing-apart simplifications (introduced for narrative structure or broader reader comprehension). These are then weaponised by the counter-critics as evidence of factual error or writer ignorance.
The strategy then turns to outright abuse of the messenger, including ad hominem attacks, personal persecution and the general spreading of misinformation about the author under the seeming principle that if you repeat a lie often enough, it becomes the truth.
The aim ultimately is to silence critics and/or antagonise them enough to ensure they waste as much time as possible correcting falsehoods or misrepresentations of what they actually said than scrutinising the investment. It is a form of de-platforming and burying of uncomfortable truths.
Is regulated communication fake news?
While counter critics might claim they are only mimicking the mainstream media's own "fake news" tactics -- a fair point in some cases -- there is an important distinction to be made in the case of investment promoters/defenders.
The object of the criticism and counter-criticism is not a moral, cultural or political stance about x, y or z -- which may or may not be true depending on the political, moral and ethical predispositions of the critic. In this case the object of criticism is a stock or investment, which can be logically and quantitatively scrutinised on its merits or detriments. That scrutiny and/or promotion is de facto regulated, and cannot be judged to be manipulative under the market abuse regime or else there are consequences.
As it stands the Financial Services and Markets Act of 2000 provides that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless the promotion has been made or approved by an authorised person or it is exempt. There are exemptions for the press but the financial media must still adhere to market abuse regulation and internal codes of contact that demand disclosure of conflicts of interests.
Which begs the question: should regulators be acting in some way to rein in the current pandemic of online investment-focused propaganda mobs who both solicit investors with misinformation and actively act to suppress fair criticism?
It is tempting to answer yes, according to the letter of the law. But the reality is that the costs and complexities involved mean there are better options available.
While it is true that something strange is happening in the world of words, statements and arguments -- in that logic is no longer a dependable commodity to win debates with on social media -- it's arguably not in anyone's interests to over-regulate such mobs or deprive them of their right to misinform.
Instead, their very presence should be considered a financial indicator. A good investment can withstand scrutiny and do so without needing to draw on the services of online cheerleaders. But a brigading mob on social media promoting a venture or a scheme is a clear-cut sign of its inability to gain traction on merits alone.
If and when corporate executives understand this, online propaganda mobs will become corporate liabilities that they themselves will want to regulate and tone down.
On the hypothetical eventuality of no more free internet - FT AlphavilleFacebook and the manufacture of consent - FT Alphaville
Why advertising substitution risk is out there - FT Alphaville
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