After Whatsapp made changes to its privacy policy, billionaire entrepreneur and Tesla CEO Elon Musk called upon his followers on Thursday to “Use Signal”, an encrypted messaging app called Signal. However, little did he may have imagined that his tweet would set off a massive buying in an unrelated stock with a similar name.
Use Signal
— Elon Musk (@elonmusk) January 7, 2021
Following Musk’s tweet exhorting his followers to use the open-source app Signal, share prices of an obscure and relatively unknown company which goes by the name “Signal Advances” saw a staggering surge of 527 per cent on Thursday, followed by another 91 per cent on Friday. In a matter of two days, the share price of Signal Advances, which was earlier hovering around 60 cent mark, rose to $ 7.19.
When Musk asked people to use Signal, he was referring to the Signal messaging app which is operated by a nonprofit organisation and serves as an alternative to texting apps such as Whatsapp, Facebook Messenger, Telegram and others. However, Musk’s suggestion to use Signal caused disruption to Signal servers as it witnessed a remarkable spike in the app downloads by the new privacy-conscious users.
The wild trading on an unknown stock and the disruption of the Signal’s servers, triggered by Musk’s recommendation underscores the Tesla CEO’s growing influence. On Thursday, he became the world’s richest man and subsequently on Friday, Tesla became the fifth most valuable company in the US.
Signal messaging app issues clarification, says it has got nothing to do with Signal Advance
The unprecedented surge in the Signal Advance’s stock price also prompted Signal messaging app to post a tweet stating that they had got nothing to do with Signal Advance.
“It’s understandable that people want to invest in Signal’s record growth, but this isn’t us,” Signal wrote. “We’re an independent 501c3 and our only investment is in your privacy.” Signal tweeted.
Is this what stock analysts mean when they say that the market is giving mixed Signals?
— Signal (@signalapp) January 8, 2021
It’s understandable that people want to invest in Signal’s record growth, but this isn’t us. We’re an independent 501c3 and our only investment is in your privacy. pic.twitter.com/9EgMUZiEZf
Signal is a cross-platform encrypted messaging service developed by the Signal Foundation and Signal Messenger LLC. According to an article published in New Yorker in October, Signal runs entirely on donations. As Signal Foundation is a non-profit organisation, it is not listed in stock exchanges.
Signal Advance’ stock had consistently traded below $1 since 2015
On the other hand, Signal Advance, which witnessed an unusually high trading activity over the last two days in the American stock market, was founded in Texas under the name Biodyne in 1992 and catered services to medical and legal workers. Later, it shifted its focus to leveraging technology in the health care sector and changed its name to Signal Advance. The company made its stock market debut in 2014.
The company is so small in terms of its market capitalisation that it does not report its financials with the SEC, the US stock market watchdog. As of March 2019, the company had no full time employees besides its CEO Chris Hymel.
After people mistook it as the parent company of the Signal messaging app, Signal Advance now has a market cap of $600 million, up from $55 million a couple of days ago. Before Thursday, the stock had never breached the $1 mark since 2015.
Similar stock market snafus in the past
The surge in a stock price of one company based on information about a completely unrelated company is not a new phenomenon. It is a familiar issue on Wall Street. Earlier too, traders had mistaken a company with another one having a similar name and invested their money in that company instead.
A couple of years back, in April 2019, on the day when the Zoom Video Communication was going to make a debut under the ticker symbol ZM, stock prices of a Chinese company called Zoom Technologies leapt more than 80 per cent in just two hours of trading. However, as the distinction between the two company came forth, the stock gave up most of its gains and closed 10 per cent up.
Similarly, when investors were eagerly waiting for Twitter’s hotly-anticipated market debut, a company named Tweeter Home Entertainment Group jumped more than 1,000 per cent.