OSC chair said this could lead to a requirement for registration by some market players, or enforcement actions
The Ontario Securities Commission is considering following British Columbia’s lead in a regulatory crackdown on stock promotions and manipulation using social media, a key element of the GameStop phenomenon that roiled markets earlier this year.
The B.C. Securities Commission proposed sweeping new rules in May that would require anyone promoting stocks on social media or via videos on platforms such as YouTube to reveal whether they own the security or derivatives of it, and disclose any compensation they are receiving for the promotion. The rules would also prohibit misstatements without requiring proof of impact on the value of securities.
“We’re looking at that in Ontario as well,” Grant Vingoe, chair and chief executive of the Ontario Securities Commission, said Tuesday during an online conference held by Canada’s largest capital market regulator.
“And we’re also looking at under our existing tools, delving into influencers, social media, to really identify misleading and manipulative statements, statements that are made by people who have financial interests, statements that are relied on because people have millions of followers, but just contain misinformation.”
He said this could lead to a requirement for registration by some market players, or enforcement actions.
Brian Kladko, manager of media relations at the B.C. Securities Commission, said the provincial regulator is reviewing feedback received in response to its proposed crackdown on social media promotions, and there is a “possibility of adopting rules with other jurisdictions” in Canada.
“Our proposed rules were enabled by an amendment to B.C. Securities Act,” he said. “If other jurisdiction adopt the same or similar rules, they might need to get similar amendments to their respective securities legislation.”
The speed at which misinformation can spread unchecked via social media, allowing for stock manipulation, is a concern at regulators around the world.
Cathie Amour, Commissioner of the Australian Securities and Investments Commission, who took part in the OSC conference, said her organization has undertaken enforcement investigations in the most egregious cases.
Coordinated activity pushing long-ignored stocks to new highs — as happened with moribund video game company GameStop in the United States — is “pretty awful” when it leads to significant investor losses and erodes confidence in the capital markets, she said.
But cracking down on suspected social media manipulation has posed a significant challenge and prompted experimentation and pilot projects at the Australian regulator, including interacting with so-called “finfluencers” who encourage retail investors to jump into financial markets, and the firms that hire them.
“Many of these folks are paid (to tout) the various products,” Amour said, adding that they don’t have qualifications or skills to provide useful advice, and are not upfront about being compensated to promote.
In some cases, the regulator has joined online chatrooms, letting investors know they’re being watched and warning that they could find themselves in the crosshairs of the market watchdog if they are manipulating or have failed to obtain a licence to sell securities.
“We’re trying things. We’re not sure we’ve got the right answers,” Amour said, noting that the first reaction among some in the chat room was to assume the ASIC messages were fake.
Edward Kholodenko, chief executive of Questrade, who took part in the same panel discussion as Amour, acknowledged that there have been a few tragic, high-profile outcomes for investors who were manipulated and lost a lot of money.
But he urged regulators and policymakers not to ignore the power of social media, including videos to educate and inform investors.
“We need to be careful (not) to be paternalistic,” he said. “We shouldn’t be looking to protect people from their money.
He suggested regulators beef up staff and expertise so they can keep tabs on what’s going on online and use social media themselves to influence people not to fall for attempts at manipulation and the “gamification” of trading.
Ontario finance minister Peter Bethlenfalvy, who spoke at the OSC’s Dialogue conference Tuesday, said he has a couple of agenda items of his own for the OSC, both involving the country’s big banks. In a letter last week, he asked Canada’s largest capital markets regulator to examine tied selling and reductions or restrictions on the selling of third-party investment products.
The first issue was raised as a concern during a months-long task force consultation kicked off by the provincial government. Full-service banks are not supposed to require clients to take on certain financial products or services in order to get others, but smaller independent investment dealers have long complained that they lose out on advisory business because they cannot compete with the suite of products including loans held out by the big banks.
The second issue the provincial finance minister wants examined, a reduction in the sale of non-bank investment products, has been linked to stepped-up regulatory requirements for advisors when it comes to understanding the products they sell. Some market watchers see it as an unintended consequence of the new requirements, while others have suggested the banks are using the new rules to give preference to their investment products.
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Former President Donald Trump is on the brink of a significant financial decision that could have far-reaching implications for both his personal wealth and the future of his fledgling social media company, Trump Media & Technology Group (TMTG). As the lockup period on his shares in TMTG, which owns Truth Social, nears its end, Trump could soon be free to sell his substantial stake in the company. However, the potential payday, which makes up a large portion of his net worth, comes with considerable risks for Trump and his supporters.
Trump’s stake in TMTG comprises nearly 59% of the company, amounting to 114,750,000 shares. As of now, this holding is valued at approximately $2.6 billion. These shares are currently under a lockup agreement, a common feature of initial public offerings (IPOs), designed to prevent company insiders from immediately selling their shares and potentially destabilizing the stock. The lockup, which began after TMTG’s merger with a special purpose acquisition company (SPAC), is set to expire on September 25, though it could end earlier if certain conditions are met.
Should Trump decide to sell his shares after the lockup expires, the market could respond in unpredictable ways. The sale of a substantial number of shares by a major stakeholder like Trump could flood the market, potentially driving down the stock price. Daniel Bradley, a finance professor at the University of South Florida, suggests that the market might react negatively to such a large sale, particularly if there aren’t enough buyers to absorb the supply. This could lead to a sharp decline in the stock’s value, impacting both Trump’s personal wealth and the company’s market standing.
Moreover, Trump’s involvement in Truth Social has been a key driver of investor interest. The platform, marketed as a free speech alternative to mainstream social media, has attracted a loyal user base largely due to Trump’s presence. If Trump were to sell his stake, it might signal a lack of confidence in the company, potentially shaking investor confidence and further depressing the stock price.
Trump’s decision is also influenced by his ongoing legal battles, which have already cost him over $100 million in legal fees. Selling his shares could provide a significant financial boost, helping him cover these mounting expenses. However, this move could also have political ramifications, especially as he continues his bid for the Republican nomination in the 2024 presidential race.
Trump Media’s success is closely tied to Trump’s political fortunes. The company’s stock has shown volatility in response to developments in the presidential race, with Trump’s chances of winning having a direct impact on the stock’s value. If Trump sells his stake, it could be interpreted as a lack of confidence in his own political future, potentially undermining both his campaign and the company’s prospects.
Truth Social, the flagship product of TMTG, has faced challenges in generating traffic and advertising revenue, especially compared to established social media giants like X (formerly Twitter) and Facebook. Despite this, the company’s valuation has remained high, fueled by investor speculation on Trump’s political future. If Trump remains in the race and manages to secure the presidency, the value of his shares could increase. Conversely, any missteps on the campaign trail could have the opposite effect, further destabilizing the stock.
As the lockup period comes to an end, Trump faces a critical decision that could shape the future of both his personal finances and Truth Social. Whether he chooses to hold onto his shares or cash out, the outcome will likely have significant consequences for the company, its investors, and Trump’s political aspirations.
Cochise County, AZ — Law enforcement officials in Arizona have apprehended Ronald Lee Syvrud, a 66-year-old resident of Cochise County, after a manhunt was launched following alleged death threats he made against former President Donald Trump. The threats reportedly surfaced in social media posts over the past two weeks, as Trump visited the US-Mexico border in Cochise County on Thursday.
Syvrud, who hails from Benson, Arizona, located about 50 miles southeast of Tucson, was captured by the Cochise County Sheriff’s Office on Thursday afternoon. The Sheriff’s Office confirmed his arrest, stating, “This subject has been taken into custody without incident.”
In addition to the alleged threats against Trump, Syvrud is wanted for multiple offences, including failure to register as a sex offender. He also faces several warrants in both Wisconsin and Arizona, including charges for driving under the influence and a felony hit-and-run.
The timing of the arrest coincided with Trump’s visit to Cochise County, where he toured the US-Mexico border. During his visit, Trump addressed the ongoing border issues and criticized his political rival, Democratic presidential nominee Kamala Harris, for what he described as lax immigration policies. When asked by reporters about the ongoing manhunt for Syvrud, Trump responded, “No, I have not heard that, but I am not that surprised and the reason is because I want to do things that are very bad for the bad guys.”
This incident marks the latest in a series of threats against political figures during the current election cycle. Just earlier this month, a 66-year-old Virginia man was arrested on suspicion of making death threats against Vice President Kamala Harris and other public officials.
Trump Media & Technology Group’s stock has taken a significant hit, dropping more than 11% this week following a disappointing earnings report and the return of former U.S. President Donald Trump to the rival social media platform X, formerly known as Twitter. This decline is part of a broader downward trend for the parent company of Truth Social, with the stock plummeting nearly 43% since mid-July. Despite the sharp decline, some investors remain unfazed, expressing continued optimism for the company’s financial future or standing by their investment as a show of political support for Trump.
One such investor, Todd Schlanger, an interior designer from West Palm Beach, explained his commitment to the stock, stating, “I’m a Republican, so I supported him. When I found out about the stock, I got involved because I support the company and believe in free speech.” Schlanger, who owns around 1,000 shares, is a regular user of Truth Social and is excited about the company’s future, particularly its plans to expand its streaming services. He believes Truth Social has the potential to be as strong as Facebook or X, despite the stock’s recent struggles.
However, Truth Social’s stock performance is deeply tied to Trump’s political influence and the company’s ability to generate sustainable revenue, which has proven challenging. An earnings report released last Friday showed the company lost over $16 million in the three-month period ending in June. Revenue dropped by 30%, down to approximately $836,000 compared to $1.2 million during the same period last year.
In response to the earnings report, Truth Social CEO Devin Nunes emphasized the company’s strong cash position, highlighting $344 million in cash reserves and no debt. He also reiterated the company’s commitment to free speech, stating, “From the beginning, it was our intention to make Truth Social an impenetrable beachhead of free speech, and by taking extraordinary steps to minimize our reliance on Big Tech, that is exactly what we are doing.”
Despite these assurances, investors reacted negatively to the quarterly report, leading to a steep drop in stock price. The situation was further complicated by Trump’s return to X, where he posted for the first time in a year. Trump’s exclusivity agreement with Trump Media & Technology Group mandates that he posts personal content first on Truth Social. However, he is allowed to make politically related posts on other social media platforms, which he did earlier this week, potentially drawing users away from Truth Social.
For investors like Teri Lynn Roberson, who purchased shares near the company’s peak after it went public in March, the decline in stock value has been disheartening. However, Roberson remains unbothered by the poor performance, saying her investment was more about supporting Trump than making money. “I’m way at a loss, but I am OK with that. I am just watching it for fun,” Roberson said, adding that she sees Trump’s return to X as a positive move that could expand his reach beyond Truth Social’s “echo chamber.”
The stock’s performance holds significant financial implications for Trump himself, as he owns a 65% stake in Trump Media & Technology Group. According to Fortune, this stake represents a substantial portion of his net worth, which could be vulnerable if the company continues to struggle financially.
Analysts have described Truth Social as a “meme stock,” similar to companies like GameStop and AMC that saw their stock prices driven by ideological investments rather than business fundamentals. Tyler Richey, an analyst at Sevens Report Research, noted that the stock has ebbed and flowed based on sentiment toward Trump. He pointed out that the recent decline coincided with the rise of U.S. Vice President Kamala Harris as the Democratic presidential nominee, which may have dampened perceptions of Trump’s 2024 election prospects.
Jay Ritter, a finance professor at the University of Florida, offered a grim long-term outlook for Truth Social, suggesting that the stock would likely remain volatile, but with an overall downward trend. “What’s lacking for the true believer in the company story is, ‘OK, where is the business strategy that will be generating revenue?'” Ritter said, highlighting the company’s struggle to produce a sustainable business model.
Still, for some investors, like Michael Rogers, a masonry company owner in North Carolina, their support for Trump Media & Technology Group is unwavering. Rogers, who owns over 10,000 shares, said he invested in the company both as a show of support for Trump and because of his belief in the company’s financial future. Despite concerns about the company’s revenue challenges, Rogers expressed confidence in the business, stating, “I’m in it for the long haul.”
Not all investors are as confident. Mitchell Standley, who made a significant return on his investment earlier this year by capitalizing on the hype surrounding Trump Media’s planned merger with Digital World Acquisition Corporation, has since moved on. “It was basically just a pump and dump,” Standley told ABC News. “I knew that once they merged, all of his supporters were going to dump a bunch of money into it and buy it up.” Now, Standley is staying away from the company, citing the lack of business fundamentals as the reason for his exit.
Truth Social’s future remains uncertain as it continues to struggle with financial losses and faces stiff competition from established social media platforms. While its user base and investor sentiment are bolstered by Trump’s political following, the company’s long-term viability will depend on its ability to create a sustainable revenue stream and maintain relevance in a crowded digital landscape.
As the company seeks to stabilize, the question remains whether its appeal to Trump’s supporters can translate into financial success or whether it will remain a volatile stock driven more by ideology than business fundamentals.
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