The Power of Going Viral

Tilikum the killer whale highlighted by the documentary Blackfish has recently died in captivity at SeaWorld. The event alone is a reminder of the troubling tale that has plagued SeaWorld for years and is now again making negative headlines for the company. Blackfish came out at an interesting inflection point, when social media was first becoming a major influence in everyday life. The movie is one of the first modern examples of the power of social media to take down a company. The sensation of videos or articles going viral on social media is a new form of risk in the modern age. Previously, a news story would take time to gain traction and viewership, but now with the click of a button people can share videos and articles with hundreds of people. These articles (whether true or not) can spread exponentially throughout the media, reaching hundreds of millions of people in just days. The power of these viral stories cannot be neglected in their power to hurt or help public companies.

While it sounds ridiculous, the power of going viral must be respected. What could be a seemingly innocuous article about the standard practices of a business could lead to a horrific earnings miss, or inversely an earnings beat. The effect of viral news is more likely to affect an investor with a short-term horizon, rather than a long only investor. Sea World was unfortunate enough to experience a rare, but devastating case where the documentary pushed the stock into a long-term pullback.

How can one benefit or protect themselves against these sensations? As ridiculous as it sounds, spending some time on social media may help to generate trade ideas. The very person whose posts you may try to ignore may contain an op-ed on a public company that is spreading quickly. It can be worth it to investigate further in order to determine whether or not the story is gaining traction. The interpretations of these shared articles and videos is often quite black and white, meaning the benefit or detraction from the company should present itself. Paying attention to viral media and acting accordingly could provide a profitable day-trade or earnings play when the appropriate situation is identified. In rare cases such as Blackfish, long term investors should not neglect the power of social media.