Elon Musk’s tweets are markets in flux – and some investors are concerned

Bitcoin’s value jumped more than 20% to $ 38,566 on Friday after Elon Musk, the world’s richest person, changed his personal Twitter bio to #bitcoin, sparking speculation that he had bought more of the cryptocurrency.

Less than 24 hours earlier, the billionaire appeared to push shares in CD Projekt, driving the computer game Cyberpunk 2077, up by more than 12%, after saying via Twitter that passengers with a new model of Tesla’s Model S Plaid car can play it game.

Hours later, Musk said, “With Cyberpunk, even the hot fixes literally have hot fixes, but… great game.”

On Tuesday, the CEO of Tesla and SpaceX sparked the crazy wave of GameStop stock when he “Gamestonk !!” tweeted. and a link to the WallStreetBets Reddit thread. The made-up word is a combination of GameStop and “stonks”, a slang term for stocks.

“There is a strange irony to Elon Musk’s ability to move the market as he attacks what he sees as unnatural market forces in short-selling,” Freetrade analyst Dan Lane told CNBC. “It may be that now is the time to have a discussion about the legitimacy of the practice.”

The tweet appeared to help GameStop’s valuation skyrocket to over $ 10 billion in after-hours trading and forced some amateur trading apps to pause trading. But some people can lose a lot of money if GameStop’s stock price collapses.

Vincent Flood, host of the VideoWeek podcast, who watches the ad market, said Musk’s tweets could have “devastating consequences for private investors as he and his friends enrich themselves at the expense of the little guy.”

Ex-Googler Rich Pleeth, an entrepreneur and tech investor in London, agreed. He told CNBC that Musk can “enrich himself with one tweet.”

“He’s an innovator, but that doesn’t mean he’s above the law,” said Pleeth.

However, Max Levy, head of business development at the Nutmeg online investment management app, said, “This has always happened in the capital markets,” citing Warren Buffett and Ray Dalio as other “influencers” on asset prices.

A few hours after his “Gamestonk !!” tweeted, Musk tweeted “I kinda love Etsy,” with a 9% share of the online craft market.

The Securities and Exchange Commission, a regulator set up in the 1920s to protect investors, declined to comment when CNBC asked if it had any concerns about Musk’s ability to influence stocks on Twitter.

The New York Stock Exchange also declined to comment, while the technology-focused Nasdaq exchange and a representative from Musk did not immediately respond to CNBC’s request for comment.

Musk has been in trouble with the SEC for tweeting about Tesla’s stock. In August 2018, he said he wanted to take Tesla privately for $ 420 a share and that he obtained the funding to do so. Musk and Tesla each had to pay the SEC a $ 20 million fine to settle the lawsuit, and Musk has since agreed to submit his public statements about Tesla’s finances and other issues to his legal counsel for review. Last year, he infamously tweeted that Tesla’s stock was “too high,” causing the stock to drop more than 10% immediately, although they more than recovered within a week.

While Musk’s Twitter actions have had a particularly pronounced effect this week, he’s been shifting stocks and cryptocurrencies for a while. Earlier this month, Musk called on his 48.3 million followers to use the encrypted messaging app Signal, which is operated by a nonprofit.

Investors were eager to support the company and rushed to get hold of stock in Signal, but many of them accidentally bought stock in a small components manufacturer called Signal Advance, pushing the stock up 1,100%.

“Regulators don’t just need to catch up, they need to proactively enforce the rules and clarify what’s acceptable,” said Lane of Freetrade. “And that also applies to the shorts.”

Lane added, “The reality is that the new brand of charismatic leader now has a public platform and is not limited to the boardroom. It’s up to regulators how they handle it, but ultimately it’s up to them to make the rulebook.”

Hussein Kanji, a venture capital investor in London, told CNBC that he trusts the SEC to do its job and keep the markets rational and fair.

“But Elon Musk acting as an ultimate influencer and stimulating demand in a regulated securities market seems odd,” Kanji said. “If he shifted volume for a consumer product, I wouldn’t raise an eyebrow.”

Steven Bartlett, founder of social media agency The Social Chain and a tech investor, told CNBC that “the public markets now have influencers like fitness and beauty.”

Musk has become the Zoella of public markets and the SEC cannot ignore it, Bartlett said.

– Additional reporting by CNBC’s Jessica Bursztynsky.