“Bloomberg terminals weren’t available for common people. “Before, you really needed to be someone to get news as it was happening,” he says. Twitter in particular, he says, was a game changer for both institutional investors and small-time traders alike.
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“Social media has become hugely important in stock trading,” says Mihir Dange, a former gold trader at the New York Mercantile Exchange, who now works with a company that integrates social media and markets. Every second, billions of dollars worth of stocks big and small exchange hands without much, if any, human involvement, and much of the pumping now comes by way of social media. It seemed like a classic case of a penny-stock pump-and-dump, the illegal practice of buying a cheap stock, talking it up to get others to buy and raise the value, then dumping it, killing longs and shorts alike.īut in today’s financial landscape, the ascendance of the algorithm has reinvented the pump-and-dump.
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Promoted as a platform for connecting to the rich and famous, Cynk had no assets and no revenue its offices were located at a non-existent address in Belize, and its only employee was its CEO, who now owned $3.5 billion in shares of a company that had no real value. What made the SEC question Cynk’s $6 billion valuation was its balance sheet. By such standards Cynk’s acutely vertical takeoff might have seemed almost normal, but it didn’t look quite right to the Securities and Exchange Commission. Snapchat, started by Stanford undergraduates in 2011, had recently turned down an offer of $3 billion. A few months before, Whatsapp, founded in 2009, sold to Facebook for $19 billion. In less than a month, its stock price rose from six cents to nearly $22 a share, an increase of more than 36,000 percent.Ĭynk’s apotheosis came at a golden moment for social media valuations.
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Last summer, a small, unknown social media company called Cynk Technology experienced the kind of runup that is the stuff of Wall Street legend.