The to-and-fro of Elon Musk’s bid to buy Twitter for an eye-watering $44 billion has been dominating the media headlines in recent months. Musk’s public pledge to purchase the technology firm is being eagerly watched by market onlookers who have witnessed the growing influence of social media and celebrities on market movements.

This has led to a phenomenon of so-called ‘celebrity stocks’ with share prices and market capitalisations heavily influenced by actions from those in the public eye. We explore this growing trend in light of recent market movements at the social media giant Twitter.

Elon Musk and Twitter

Since its inception, Twitter has positioned itself as a platform for world leaders, celebrities and cultural commentators to influence public discourse. In recent years this influence has noticeably, and sometimes controversially, encompassed stock price performances.

Arguably the most infamous case came in August 2018 when Musk floated the idea of taking Tesla private. Shares jumped 11% before swiftly dropping as doubt mounted about his ability to pull off the deal. Musk was ordered to pay a $20 million fine to settle fraud charges as a result, and was ordered to step down as chairman for three years. Nonetheless, Musk conducted a Twitter poll in November 2021 over whether he should sell 10% of his Tesla stock. After a clear majority of respondents voted ‘yes’, Tesla shares fell at the sharpest rate in eight months, tumbling as much as 7.3% in one day.

Fast forward to now, there are signs that the social media posts of the serial entrepreneur are impacting the value of Twitter, in which Musk is the largest individual shareholder. Indeed, Twitter’s price declined dramatically by 10% after he said his takeover might fall through, to $40.90 – well below his initial $54.20-a-share offer.

The celebrity stock phenomenon

This is by no means the first time that a business’s share price has been impacted by a celebrity.

At last year’s Euros, international footballer Cristiano Ronaldo famously expressed his candid view on the tournament’s sponsors Coca-Cola in a press conference. With the world’s media watching, the simple gesture of swapping two bottles of the fizzy drink and replacing it with a bottle of water caused the company’s shares to drop by 1.6% in just 30 minutes, from $55.60 to $55.22. This resulted in a loss of $4 billion from Coca-Cola’s market capitalisation – taking it from $242 billion to $238 billion. A week later, shares of Coca-Cola were continuing to fall and ended the day at $53.97, valuing the company at $234.38 billion.

In 2018, another victim of the celebrity stock phenomenon was Snap, owner of image-sharing app Snapchat. Social media influencer Kylie Jenner managed to wipe $1.3billion off Snap’s market cap after tweeting that she no longer used Snapchat. It took until June 2020, over two years later, for the app’s share price to regain its level pre-Jenner’s tweet.

Keep an eye on the feed

The story of Musk and Twitter is by no means over and whilst it continues to take on a Hollywood plot of twists and turns, there remains a central question around the Tesla founder’s future intentions against the backdrop of a tech sell-off in the markets. More widely for market participants, Musk’s use of the Twitter platform during this takeover attempt further highlights the ability of those in the public eye and celebrity CEOs to influence financial markets. Whether or not Musk goes through with the acquisition of Twitter, many will be watching his Twitter feed closely.

Published: 8 June 2022

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