Updated: Nov 3, 2022
Our firm has been provided with reports from a company that specializes in market surveillance of social media postings affecting OTC Markets companies. The reports are incredibly detailed and include important data on individual as well as group postings. The data focuses on separate OTC Markets issuers and what is posted about them in the public domain. These reports demonstrate the effects that FUD postings have on certain issuers by examining a range of dates of the posts, the contents of the posts, and its effects on share volume and stock price. The results are correlating, astounding, and shocking at the same time, something all retail traders should be aware of.
While our firm is in the process of bringing several lawsuits against such posters that the FUD reports indicate have engaged in FUD against specific issuers giving rise to potential market manipulation claims in violation of the Securities Act, we are recommending to issuers to make FUD Report information public in their regulatory filings. In addition, we hope that our efforts with the SEC will soon require a new section in regulatory reporting that discusses the impact of such social media postings on stock volume and price.
Figure 1. below is a screenshot from a FUD Report we received from one of our clients. The report shows the issuers stock performance during the time of a single poster’s posts within a few days on a single social media platform. The poster’s handle and issuer stock symbol have been redacted. It demonstrates the effects on the issuers stock volume and price during the period of the actual posting(s). While only a very small example, the voluminous data aggregated indicates a much broader systemic problem with multiple posters working on concert.
It should be noted that FUD Reports include data of public postings by multiple posters on multiple message boards. This is publicly obtained data backed up by actual screenshots of all posts. The graph above reflects stock performance during the FUD postings from a single poster starting on March 29, 2022, and ending April 1, 2022. The volume goes up while the stock price crashes. It should also be noted in this graph that starting on about March 22, 2022, other posters started posting negative comments on this date. This sample focuses on a single poster on a single social media platform. Draw your own conclusions.
The results of these reports are so important to the public markets that they should be made part of the issuers regulatory filings. These reports may also demonstrate market manipulation attempts by a single poster, or a collective of posters, slander and libel claims and possibly tortious interference with contractual claims.
Motivations of such posters is a different story. Some social media posters are crusaders, thinking they are providing a valuable public service. Others may have personal vendettas against other social media posters, the issuers, or even the issuers executive management team. Others may even be paid to bash stocks to drive down the price of the stock for nefarious purposes. Others may just have emotional issues and figure that this is a good way to engage in discourse somewhat anonymously. It is likely that some of these posters lost money investing in a certain issuer and are mad enough to launch a personal (or collective) campaign(s) with others who lost money, to try to hurt the company and/or its management.
What can you do? Each social media platform has a block feature that you can activate to block FUD #toxicposters. Use it. This is a very useful tool because not only does it limit your exposure to negative FUD postings, but it also decreases the size of a FUD’ster’s audience and hence, could decrease the negative effects on an issuers stock price. Taking away a FUD’sters audience is a very powerful tool because it will leave their comments in limbo. The less retail investors are exposed to FUD, the better your decision making will be.
Not all social media posts are FUD. In fact, most social media stock posts offer good analysis, research, historical and other relevant information that retail investors should consider in making investment decisions, even if the information and research is negative. Retail investors should always consider the source, motivation(s) or other factors before hitting that block button.
The acronym FUD connotes a pattern or patterns of negative posting(s) for the purpose of creating fear and doubt in investors, not for the legitimate purpose of sharing information. FUD’sters always claim truth and fact is on their side as to establish their legitimacy. If the repeated posting of negative information rises to a certain level, especially if the information is stale or false (as stated or presented), then such postings may give rise to legal claims by other posters, issuers and/or their management teams.
Most public companies file audited financials. The process of an audit with a PCAOB Certified Accounting firm is grueling and expensive.The auditors verify all statements made in disclosures before they are filed with the SEC. Other companies have attorneys providing the disclosures to the SEC or some don’t report at all. In those cases, it can be hard to validate what is being disclosed. In those cases, you can reach out to the issuer’s PR or IR firms and ask that your questions be presented and answered at the next annual shareholder meeting. You may not get the answers you are looking for if the information is not made public by the company. Public records may also be a good place to further your research, but not every public record is a verified fact. The trick is to be able to recognize the differences between fact and opinion. Facts are facts, opinions … well, everyone has one. Keep that in mind.
Mark R. Basile is a senior attorney at The Basile Law Firm P.C. and manages the firms nationwide securities litigation team. Mark can be reached at firstname.lastname@example.org. To learn more about what we can do for you, please call us today at 516.455.1500 to request your free initial consultation. With offices in New York, Texas and Florida, we serve public companies nationwide.