The pandemic brought about a shift in how investments are discussed online and has increased the influence social media has on the market. Social media is playing a larger role in the way ordinary retail investors understand and interact with today’s markets. Whether with investments in cryptocurrencies, NFT projects, or traditional security exchanges, social media’s influence has grown drastically in all spaces. What became clear in 2021 with the WallStreetBets GameStop stock rally is that social media allows for investors to band together, learn from one another, and take advantage of markets in novel ways.

As investors become more informed, they begin asking more, and more difficult, questions about their investment and the state of the current market. These challenges are compounded as more investments and projects become available to retail investors through the advent of crypto investments and NFTs. Companies and securities regulators alike are paying closer attention to the influence social media has and should be informed as to the advantages and disadvantages associated with this influence.

Regulators getting more involved

Regulators have begun using new tactics to remain involved in the online conversations to ensure that investors are aware of the risks involved in investing in the market and ensuring that retail investors are conducting their own due diligence. In the wake of the WallStreetBets rally, the Ontario Securities Commission (OSC) conducted a pilot project where clearly identified members of the OSC joined subreddits reminding users of risks when investing. The Canadian Securities Administrators (CSA) is launching a TikTok campaign to encourage Canadian investors to do their research and ask questions to ensure that prospective investments are right for them. Issuers are also concerned about the creation of echo chambers where investors reject skepticism and are convinced of the potential success of certain investments, ignoring potential risks.

Companies, consumers, and social media

The shifting landscape of the current market downturn coupled with the lasting effects of the pandemic on society, the way we work, and the economy more generally, has amplified consumer concerns and reinforced the unpredictable nature of the market.  Social media can have an impact not only on the stock price but the reputation of the company.