Facebook or Twitter might be great to keep up to date on family and friends. However, Securities and Exchange Commission warned investors in July 2014 that social media can spread false information.
Fraudsters use phony profiles or handles that appear legitimate and essentially lie about a publicly held company’s prospects, says Owen Donley of SEC. Scammers benefit by touting companies in which they own stock, only to sell as soon as the share price rises, or by scaring legitimate investors into selling their shares, so scammers can buy at an artificially low price, SEC says.
Red flags for bad stock tips on social media are similar to those that are received through email: Is the hot tip about a thinly traded, little-known stock? Does the tip appear as a direct message via Twitter that mentions you?
Don’t click on any links in such messages, Donley says, and you should consider “unfollowing” or “unfriending” those who send such messages.