Elon Musk’s tweets move markets and some investors are worried

The value of Bitcoin jumped more than 20% to $ 38,566 on Friday after Elon Musk, the richest person in the world, changed his personal Twitter biography for # bitcoin, fueling speculation he had bought more of the cryptocurrency.

Less than 24 hours earlier, the billionaire appeared to be asking for shares in CD Projekt, which causes the Cyberpunk 2077 computer game to rise more than 12% after, via Twitter, a new model of Tesla’s Model S Plaid car allow passengers to play the game.

Several hours later, Musk said, “With Cyberpunk, even reviews have literally reviews, but … a great game.”

On Tuesday, the CEO of Tesla and SpaceX fueled the frantic rise in GameStop shares when he tweeted “Gamestonk !!” and a link to the WallStreetBets RedSit thread. The invented word is a combination of GameStop and “stonks”, which is a slang term for actions.

“There’s a strange irony in Elon Musk’s ability to move the market, attacking what he sees as unnatural forces in the short-selling market,” Freetrade analyst Dan Lane told CNBC. “Maybe it’s finally time to debate the legitimacy of the practice.”

The tweet appeared to help GameStop’s valuation soar to more than $ 10 billion in after-hours operations and forced some amateur trading apps to pause trading. But there are people who will lose a lot of money if the price of GameStop shares falls.

Vincent Flood, presenter of the VideoWeek podcast, which analyzes the advertising market, said Musk’s tweets could “have devastating consequences for retail investors while he and his friends get rich at the expense of the little one.”

Former Googler Rich Pleeth, a businessman and technology investor in London, agreed. He told CNBC that Musk can “get rich with a tweet.”

“He’s an innovator, but that doesn’t mean he’s above the law,” Pleeth said.

However, Max Levy, head of business development for online investment management app Nutmeg, said, “This has always happened in the capital markets,” listing Warren Buffett and Ray Dalio as other influencers. “in asset prices.

A few hours after his “Gamestonk !!” tweet, Musk tweeted, “I love Etsy a bit,” with shares in the online craft market rising 9 percent later.

The Securities and Exchange Commission, a regulator created in the 1920s to protect investors, declined to comment when CNBC asked if it was concerned about Musk’s ability to influence Twitter shares.

The New York Stock Exchange also declined to comment, while the technology-focused Nasdaq stock exchange and a Musk representative did not immediately respond to CNBC’s request for comment.

Musk has faced problems with the SEC for tweeting about Tesla shares. In August 2018, he said he wanted to deprive Tesla of $ 420 per share and that he had secured funding to do so. Musk and Tesla had to pay the SEC a $ 20 million fine to settle the lawsuit, and Musk has since agreed to submit his public statements about Tesla’s finances and other issues to his legal counsel. Last year he posted an infamous tweet that Tesla shares were “too high” and immediately sent the shares up more than 10%, even though they bounced back more than a week.

While Musk’s shares on Twitter have had a particularly pronounced effect this week, he has been changing stocks and cryptocurrencies for some time. Earlier this month, Musk urged his 48.3 million followers to use the encrypted messaging app Signal, which runs a nonprofit.

Eager to support the company, investors rushed to repurchase Signal shares, but many of them accidentally bought shares of a small component producer called Signal Advance, which sent its shares 1,100% .

“Regulators not only need to catch up, but they need to proactively enforce the rules and clarify what is acceptable,” Freetrade’s Lane said. “And that goes for the shorts, too.”

Lane added: “The reality is that the new charismatic leader brand now has a public platform and is not limited to the boardroom. It depends on the regulators how they deal with this, but eventually it will be up to them to update the book. of rules “.

Hussein Kanji, a venture capitalist in London, told CNBC he is confident the SEC will do its job and keep markets rational and fair.

“But Elon Musk acts as the ultimate influencer and drives demand in a regulated stock market seems strange,” Kanji said. “If I moved the volume of a consumer product, I wouldn’t raise an eyebrow.”

Steven Bartlett, founder of social networking agency The Social Chain and technology investor, told CNBC that “public markets now have influencers like fitness and beauty.”

Musk has become the Zoella of public markets and there is no way to fix it for the SEC, Bartlett said.

– Additional reports from Jessica Bursztynsky of CNBC.