How false information can affect the value of your company
The stock market is not immune to the impacts of false information. It is difficult to truly quantify the global losses in economies due to misinformation, but it is seen as a significant and an increasing risk. It was estimated that the spread of false information creates around $39 billion in annual losses for the US economy alone. And there are other specific examples highlighting losses due to false information: In 2019, false claims spread about the poultry industry in India led to subsequent major losses for the agricultural industry including maize and soya feed products and this incident caused an impact on India’s overall economy. False information is said to have also contributed to China’s housing and real estate crisis.
False information can affect the share prices of your company. An example of how false information resulted in a direct decline in share prices happened in 2015; a Scottish man faced criminal charges after he made false claims in tweets about two companies which resulted in their share prices dropping. False information may also have an impact on a company’s revenue. In 2017, six Indian and Asian restaurants in the UK were subject to an internet hoax and this resulted in one of those businesses losing almost half their revenue.
Investors may also be misled into investing in what is known as ‘pump and dump’ - schemes that have become more prevalent and intense in recent years. In this illegal act, an investor will promote a stock by spreading misleading statements and false information - like “pumping” the share price. And once more people invest and the stock value increases, they will sell-out - essentially they are “dumping” the share price. After the initial increase in share prices, the value will decline drastically once the initial investors sell out. Recently, five individuals (from the Netherlands, Canada and the U.S) were charged for a $58 million pump and dump scheme operating from a call centre based in Columbia. Investors in the retail sector were misled by claims of high returns on their investments and the operators deceived these investors into buying all the stock of small US companies using fake websites, various aliases and spoofed phone numbers.
The spread of false information has affected all businesses across industries and geographies. But how can we combat it? The best way your business can reduce the impact of false information is to be prepared. See some of our other blog posts for more insights and helpful tips on how best to protect your company from the spread of false information. These tips include the ways in which you can monitor information and reception of your company and identify false information, how you can best prepare for incidents of false information as well as how to respond to false information. We also have tips on how to reduce your reputational risk on social media and how to spot and avoid fake reviews.