"A finfluencer was recently ordered to pay a penalty of $30,000 plus costs by an Alberta Securities Commission panel for failing to properly disclose that he was paid to publish social media posts that promoted certain small-cap Canadian stocks. He acknowledged that his only formal education in investing or finance was an introduction-to-finance course at university and a handful of online do-it-yourself courses. Nonetheless, he had over 50,000 subscribers on YouTube."
"Is this a one-off situation? Or a sign that the financial world around us has changed in ways we simply didn't contemplate when our current capital markets framework was built? The finfluencer's class is in session. Is it worth paying for? A recent paper in the Journal of Behavioral Finance, Digital Sentiment and the Retail Crowd: How Finfluencers Shape IPO Valuations, found that social media hype can have an impact on initial public offerings to a degree that can't be ignored."
"Looking at almost 400 IPOs in India over a decade, the researchers found that those endorsed by macro finfluencers, defined as financial content creators with more than 200,000 followers, actually showed higher initial returns after going public than normal. Endorsements from macro finfluencers were associated with a first-day closing price almost 50 per cent higher than the IPO offer price. Additionally, the 180-day post-IPO return was 35 per cent on average."
A finfluencer was ordered to pay a $30,000 penalty plus costs by an Alberta Securities Commission panel for failing to disclose paid promotions of small-cap Canadian stocks. His only formal investing education was an introductory university course and some online DIY courses, yet he had over 50,000 YouTube subscribers. A study of almost 400 IPOs in India over a decade showed endorsements by macro finfluencers (over 200,000 followers) correlated with first-day closings about 50 per cent above IPO prices and average 180-day returns of 35 per cent. Retail participation rose while institutional behaviour remained unchanged, and finfluencer hype acted as an informal complement to traditional roadshows, challenging existing capital markets frameworks and attracting regulatory scrutiny.
Read at The Globe and Mail
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