The iSignthis share price is down 30% today

Are social media and stock market forums producing wild share market swings?

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published September 12, 2019 4:03 pm AEST

The iSignthis Ltd (ASX: ISX) share price got smashed in trade today despite the self-described neo-banking, identification and payments platform provider releasing no specific news to the market.

The stock is down to 96 cents and much of the selling is probably related to profit taking after a huge run and as 'hot money' moves out of the stock.

Even after today's falls iSignthis still has a market value around $970 million, despite posting just $7.5 million in operating revenue for the six months ending June 30, 2019.

However, it did claim to be cashflow and EBIT positive for the quarter ending June 30, 2019.

In the internet age of stock gossip forums and social media it's not unusual for popular but speculative tech shares to achieve massive valuations despite having little in the way of revenues, let alone profits.

Previous examples include GetSwift Ltd (ASX: GSW), LNG Ltd (ASX: LNG) and 1Page Ltd (ASX: 1pG), the latter of which went effectively bankrupt.

There are three social media driven investment trends I wouldn't touch with a barge pole.

Pot stocks, cryptocurrencies, and overhyped tech businesses with almost no revenue but huge valuations.

As such you can count me out as a buyer of any of these businesses.

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