Small investors networked via online forums seemingly played a large role in the mysterious crash of Credit Suisse shares earlier this month. The once proud big bank now finds itself demoted to a meme stock.
Gamestop, AMC, and...Credit Suisse? There are signs the shares of Switzerland's second-largest bank also fell victim to the «meme stock» phenomenon at the beginning of October. It seems thousands of small investors networked via online forums such as Reddit would bet on a crash of Credit Suisse shares, driving the stock market valuation of the troubled bank even lower.
Over the weekend of October 1, the share price plunged to an all-time low of 3.67 francs ($3.65). This was after an internal plea from CEO Ulrich Koerner was leaked urging employees to stand fast in the face of the current turmoil and spread like wildfire on social media.
The chatter found its way to online forums, where thousands of investors meet to make concerted bets on individual stocks.
Going Bust
The «New York Times» (behind paywall) reports in an entertaining article that on October 1, a certain Jim Lewis posted a message on Credit Suisse shares: «Markets are saying it’s insolvent and probably bust. 2008 moment soon?»
Still, that seemed far-fetched, given the bank's continued solid capitalization, especially since Koerner had just cautioned in the memo not to confuse the share price and capital base. «I know it’s not easy to remain focused amid the many stories you read in the media – in particular, given the many factually inaccurate statements being made,» he said according to the internal memo.
11,000 Tags
Nevertheless, Lewis' Tweet resonated strongly among his 300,000 followers on Twitter, where he goes by the handle«Wall Street Silver.» The mass of fans «liked» the tweet 11,000 times and forwarded it 3,000 times.
This sparked the conflagration, especially since «Wall Street Silver» was far from the only one to tee off on Credit Suisse. «Credit Suisse is fxxxed,» was the tone on the Reddit channel «Wallstreetbets,» a notorious haven for mass speculation around such companies as Gamestop in early 2021.
When contacted by the Times, Lewis explained that for his tweet, he only paid attention to what was happening on Reddit forums and the Credit Suisse stock price. So while the analytical power was minimal, the broad impact of his message was still greater.
Like the fire department
Taken together with other online speculation, Credit Suisse management was put in a bind, prompting it to reassure key investors over the weekend and appease the general public via traditional media. This has been somewhat successful. Since the beginning of October, the share price has risen by 15 percent and is currently trading at 4.65 Swiss francs per share.
But once a company is demoted to meme status it should not feel too safe from the swarm of small investors, and a new conflagration in the forums could ignite in no time.
