This week, reflecting on the GameStop saga, we look at the role of social media in retail investment decisions and how these could have an impact on the Mexican stock market.
The story behind the GameStop rally has been well documented on various media outlets, and the origin can be traced back to Reddit, a social media platform that describes itself as “a network of communities based on people’s interests”, and more specifically, to WallStreetBets, a group within Reddit amassing over 8.9 million members. Some so-called ‘Reddit investors’ identified that there was an opportunity to bet against the short positions long held by hedge funds and for a while outsmarted the hedge funds as the stock skyrocketed (until the stock fell back down to earth).
Previously, we discussed the best way to build meaningful relationships with retail investors due to the dramatic growth in interest in retail investing since the start of the pandemic. This growing interest can be partially attributed to the influx of social media driven investors to the stock market, as the GameStop saga clearly exemplifies. Another reason retail investing has gained some push over the years is the increased accessibility to trading, with apps such as Robinhood in the United States or GBM+, Kuspit or Flink in Mexico (you can read more about this phenomenon here). At first glance, the role of social media in the Mexican stock market seems to be limited; but with Reddit groups such as Mexico Financiero (Financial Mexico), with over 3,000 members; multiple TikTok accounts encouraging users to take a chance on trading, like invertirconcabeza (investing with conscience) which has over 119,000 followers; retail investor information providers such as Yahoo Finance Mexico, Investing.com México, Infosel Retail, seekingalpha.com growing by leaps and bounds in Mexico; and the emergence of Clubhouse, an invitation-only social media platform where members broadcast audio conversations about pretty much anything, the tide is shifting. Digitt has a list of some of the other financial blogs with success in Mexico.
Undoubtedly, retail investing needs to be on the radar of any public company, and with the range of investors diversifying at a remarkable pace, it can be hard to keep track of how to appeal to them. What can be done? For starters, track the mentions of your company on social media, and financial websites, working with your external communication team so as not to be taken by surprise. We recommend https://www.talkwalker.com and naturally google alerts. Second, have your own appropriately prudent and conservative presence on social media such as Reddit, Instagram, Yahoo Finance, LinkedIn, TikTok or Twitter – nature abhors a vacuum. Thirdly, the Investor Relations materials focused on the retail market must be accessible and digestible. No millennial app-based investor wants to dedicate large amounts of time to understanding the financials of a company – it needs to be quick and easy. Make it visual, often through the use of graphs, tables, infographics etc. It is beneficial if the materials (website, reports, presentations etc.) are compatible with cell phones and if they are set up for continuous scrolling (e.g. for websites, rather than having to click through various menus) then this also helps to deliver more of your material to the consumer. Fourth, as the generation that has long been identified as an advocate of addressing social and environmental issues, (ESG), the communication strategy must disclose the company’s efforts to mitigate the impacts the business may have on society and the environment. Fifth, reach out to the Mexican retail brokers, such as GBM+, Flink, Kuspit and others to offer webinars and talks.
As always, Miranda-IR is happy to help on any IR matter, including how to effectively address the growing retail investors segment or how to better understand and communicate company information with this audience.
Contacts at Miranda Partners