“It’s time to go to the moon.”
 
This sort of vernacular has arguably driven the price of a relatively unknown US medical technology stock – TransEnterix Inc – to a punchy 522% increase over the past month. While boom and bust amongst penny stocks is nothing new, the latest source of share price hype and its reach into more established companies is raising eyebrows.
 
Amidst a blizzard of rocket emojis in certain corners of the internet, previously unknown companies can overnight build up enthusiastic followings that show little or no regard for traditional financial signals.
 
If yelling down a phone on Wall Street in New York was once the popular image of trading, perhaps it needs to be updated to feature all-caps typing on Reddit, which is based on Market Street in San Francisco.
 
In recent months there has been a 21% increase in membership of an almost half-million strong ‘subreddit’ called /r/pennystocks, and discussions elsewhere on the platform aren’t limited to the smaller players.
 
As well as hyping individual stocks, they’ve started to hunt hedge funds.
 
Yesterday, members of Reddit’s ‘Wallstreetbets’ claimed a significant victory after a $13bn hedge fund had to abandon a short position on GameStop with huge losses. Thread members had gleefully piled into the stock, crashing several online trading platforms in the process and on Monday caused its value to increase by 145% in less than two hours. It looks like this is only the beginning, with heavily shorted Pearson and Cineworld the latest to see prices surging after a seemingly inexplicable pile on.
 
Lockdown may be adding fuel to this particular fire, with a new cohort of bored day-traders seeking kicks denied to them by ongoing restrictions. They are enabled by a plethora of app-based trading platforms, many with in-built chat or forum functions that provide further rich habitats for the hypebeasts to roam.
 
Most of these frenetic boosters operate outwith the controls that surround traditional financial advice, and their impact is amplified by an already volatile stock market. Unsurprisingly, there are growing concerns about the ethics and legality of such behaviour.
 
This trend goes far beyond the traditional challenges associated with activist shareholders.  Perhaps smaller listed companies and hedge funds now need to consider how they can communicate with a shouty new wave of Reddit roulette investors.