Like many industries disrupted by the internet and social media, the traditional model of investor communication has evolved . Some things have remained the same, such as earnings announcements, trading statements and updates as well as SENS announcements.

In addition to mandatory disclosures, listed entities traditionally engage with investors and analysts through investor days, site visits, management lunches, investor conferences as well as one-on-one meetings. These remain part of a robust investor relations programme.

More recently however, engagement outside the regulated channels has emerged - and gained traction. This includes social media platforms such as Facebook and Twitter, as well as “new kids on the block”, Discord and Reddit. On these platforms, self-professed investors or traders are not shy to share opinion-based “facts”, with little to no verification or fundamental analysis. Some of these vocal “experts” gain large followings and become quite popular (through “likes” and “shares”) and whatever they say almost becomes a self-fulfilling prophecy through the sheer weight of numbers and sentiment.

Company A made several large overseas acquisitions, funded mostly by foreign-currency denominated debt. The acquisitions did not perform as expected, reflected in the downward spiral of the company’s share price. The company found itself in a position where the interest charge exceeded operating profits and debt represented more than 20x the company’s market capitalisation.

The only way out was to sell international assets. However, the lenders did not like the idea and instead offered to recapitalise the business through a debt-for-asset swop. That was the trigger for the activist shareholders to get involved - several of them were retail shareholders of the company and were concerned that it would be “stripped bare”, leaving nothing of value for minority shareholders. A classic David vs Goliath story started to take shape.

This story illustrates how quickly and effectively even a small band of shareholders numbering a few hundred can organise themselves into a meaningful voice that not only has to be acknowledged by company management but could also influence the share price and its tradability.

In the end, the company proceeded with the restructuring process. However, the activist group did exert some pressure on the process and was certainly noticed by management. It is debatable how much the activist group contributed to share price volatility, but anecdotally at least, there seems to have been a reasonable impact.

The first mention of a shareholder activist group in the media was on 10 February 2021.At that point very little was known about the group, who they were representing or even who their representative/leader was.

There were several phases to the “Twitter war”, taking place over consecutive months.

While there are occasions where some correlation between Twitter activity and share price movement occurs, it cannot be said definitively that social media activity is the primary share price driver. However, one can safely conclude that it was a large contributor and, on occasion, the primary driver. The impact on volumes seems stronger, as there does seem to be an uncanny, albeit not perfect, relationship between “tweets” and trading volume.

Recently, a JSE-listed company (for purposes of this case study, referred to as Company A) became the topic of much discussion on social media. To the casual observer, it appeared that its share price was more responsive to sentiments expressed on social media than to underlying fundamentals.

One reason for the apparent success of social media in driving the company’s share price could be attributed to the absence of stockbroker research on the company, i.e., no credible, informed sources of company operations, earnings expectations and net asset value, amongst others. Instead, it was set upon by a smattering of faceless people with “handles” instead of names, handing out opinions and “back-of-the-envelope” calculations. These individuals eventually organised themselves into a group of “activist shareholders” mainly on Twitter, but later also on Discord and Reddit. The activist group at some point claimed to represent close to 35% of the company’s shareholder base and started to meaningfully influence opinions about the company and even the direction of its share price.