Last Thursday Elon Musk (Tesla CEO) urged his Twitter followers to use Signal App instead of Whatsapp over privacy issues. Elon Musk tweeted after WhatsApp’s updated terms of service raised concerns on social media.
However Investors took it in a wrong way and investors started purchasing shares of an obscure and unrelated company called Signal Advance, Texas-based biotechnology company.
Signal, the encrypted messasing platform, isn’t a publicly traded company. However till to date the Biotech company continue to advance more than 10000%
Usually, it is just a pump and dump scheme run by the operators and finally dumped to the common retailers who attempt to chase the momentum for faster gains.
Accoding to CNBC,
During Monday’s trading session(11th Jan), the stock rose 438% and reached a high of $70.85, up from a closing price of 60 cents on Jan. 6, a day before Musk’s tweet. The stock saw its highest trading volume since going public in 2014 on Monday; more than 2 million shares changed hands, while on Jan. 4, not a single share of the stock was traded. Signal Advance, which reported receiving no revenue in 2015 and 2016, is now worth more than $3 billion.Source : CNBC
Is this the first time such wrong stocks are purchased?
Of course not. Last month 3rd Dec 2020 a public company named Luminar Technologies surged more than 3000%. Investors started buying the wrong company name Luminar Media Group (LRGR) instead of Luminar Technologies (LAZR) just because of the mistaken identity
Right now at the time of writing this article, Luminar Media Group (LRGR) is trading at 18 cents.
Investors Bought the Wrong Zoom
Back in Apr 2020 when most of the countries went for a lockdown and online apps like zoom are getting popular investors went frenzy over buying the wrong zoom stock once because of the mistaken identity.
Investors bought $ZOOM (Zoom Technologies – Chinese company making mobile devices) instead of the ticker $ZM (Video Chat Platform).The accidental purchase of the wrong Zoom shares rocketed the price of the lesser-known company up by 1800%. Subsequently, the SEC (US Regulator) stepped in and removed $ZOOM from the stock market
and right now Zoom Technologies is trading around 20 cents.
So What do you think? Is investors are really idiots when comes to purchasing the stocks without doing any basic due diligence or they just get caught in buying the stocks with extraordinary momentum? Let me know your thoughts in comments.