Pump and Dump 101: How to make a stock trend in 7 steps

You will need tweets from people who have good engagement with their followers/subscribers, and not necessarily a large following.

Finfluencers are being actively recruited by companies or other large investors to pump-and-dump stocks during IPOs or other developments such as the signing of a deal or entering a new market.

Recently, a trending hashtag — #MonopolyStocksToInvest — was used to discuss BLS International, which provides visa consultancy services. The stock gained 8 percent that trading day.

The company informed Moneycontrol it was not aware of this hashtag trend or any suspicious third parties trying to manipulate the stock price and/or volumes.

Also read: #MonopolyStockstoInvest: Trending hashtag promotes a stock that rose up to 8 percent 

Finfluencers, analysts and a digital marketing expert Moneycontrol spoke to said the practice of finfluencers being recruited to make a stock trend is rampant and explained how this scam is pulled off.

They said it can be done with seven to eight big finfluencers with more than 50,000 followers and a “good engagement”, helped along by 100 to 200 microinfluencers, and a budget of a little over Rs 50 lakh (based on a back of the envelope calculation). A finfluencer told Moneycontrol that companies even come with a budget of over Rs 1 crore.

Here is the "cheat sheet" that is usually followed, which responsible market participants should not even look at.

Have the text ready: Firstly, the scam-runner — a company or a third party— must provide the text of the message, with keywords — such as monopoly or big target market—and in variations. Often this is not done seamlessly and people spot the similarities pretty quickly, ending in embarrassing memes.

Strictly no tagging the company: Remember to give strict instructions that the company’s official handle or those of senior executives must not be tagged. “This is because they don’t want it traced back to them,” said a finfluencer, who has been approached by several companies, and who has turned down the offers.

Use multiple social media platforms: According to a finfluencer, who was formerly unregistered and was approached by a company for such a campaign, the trend works best if the finfluencer talks up a scrip in their WhatsApp or Telegram group, and then discuss it on Twitter or other platforms with a bigger and more visible public following.

The finfluencer, who turned down the offer, said that companies do not explicitly say that they want you to promote their stock. “They will invite you to meet the management for a discussion but the whole slant of the conversation is that they expect a positive post after that and not a research-based analytical piece,” he said.

Target 100 tweets a day to kick it off: You will need 100 tweets a day, if you want the topic to trend for a day, according to an executive with a marketing agency that works with finfluencers. That needs to be multiplied by the number of days you want your stock name to trend. Each tweet from a big finfluencer can cost anywhere between Rs 50,000 and Rs 1.20 lakh and one from a microinfluencer can be bought with as little as Rs 2,000.

But isn’t 100 too small a number? “If influencers in a particular social-media community tweet, then they will get retweeted and that’s how the trend catches on. People will retweet out of FOMO even if they don’t fully understand it,” the executive said.

Therefore, engagement is key: You will need these tweets from people who have engagement with their followers/subscribers, according to the marketing executive.

“The number of followers does not matter as much as the engagement, so even if the person has only 1,000 followers if the engagement is high, this person can make a hashtag trend… engagement from four to five percent of your followers will be considered good.”

For example, in the recent trend that promoted the stock mentioned above, a Twitter handle that has less than 50K followers but with over 5 percent engagement on that social media platform was recruited.

To get a rough idea about the engagement levels, there are free features available on platforms such as HypeAuditor. Of course, for a more detailed analysis of how an influencer’s posts perform online, you will need to subscribe to these platforms’ plans.

Niche audience works best: If you want your stock to be in the news around the time of a public issue, then find a finfluencer who discusses IPOs. If you want your small or mid-cap stock to trend, then find a finfluencer who “discovers” these stocks.

“If you have been talking about lifestyle for a while and then suddenly start talking about investing, then people are highly likely to ignore it and extremely unlikely to repost it, which is what we need to make it a trend. Therefore, ideal would be people who have been posting about this topic,” said the marketing executive. But that would mean a higher budget.

According to a finfluencer, to get even a single post from a person who has a niche audience, a company may have to shell out as much as Rs 1.2 lakh.

The finfluencer says that companies can choose to work with a few big finfluencers, paying them Rs 50,000 to Rs 1 lakh a tweet, and then hire a few micro finfluencers (between 1,000 and 50,000 followers) for Rs 2,000 a tweet.

Get this army of influencers to tag people who discuss these topics, even if they are not part of the "campaign" in the hope that they will retweet when they see a trend, again from FOMO.

Also read: MC Investigates: Companies hire finfluencers for IPO promotions that violate regulations

Steer clear of registered analysts: They cannot use the catchiest hashtags such #multibagger or #multibagger stocks.

A registered research analyst, who did not want to be named, said, “We are not allowed to promise any kind of returns, and we can’t even write anything that is indicative of that, like multibaggers.”

In fact, after a post discussing a stock, they have to give a lengthy and sentiment-dampening disclaimer, saying that investment is subject to market risk and that their registration does not guarantee performance.

Registered analysts (RA) also cannot publish any information that is not publicly available, therefore, if you want to push a false but positive narrative—without being held responsible for it — then the best way is to approach unregistered finfluencers. The

RA quoted above said he had brought out a research report on a company taking details from its website and filings, but found that a finfluencer had far more granular details such as the size of the company’s target and projections for a few years.

“The post was detailed and therefore whatever that finfluencer says would have had more credibility, in terms of a suggestion or a ‘recommendation’. Later, I came to know that the information was fed by the management,” the analyst said.

Looking at the way unregistered advisers are benefitting from such campaigns, the unrest among registered investment advisers is on the rise. While they follow the rulebook, the unregistered crowd is allowed to freely enable such illegal activity and go scott free, the said .

Ayush Agrawal, a registered research analyst, said, “Registered research analysts have so many restrictions but the unregistered ones are free to post whatever they want. As a starting point, I wish the regulator keeps a watchful eye on how these unregistered advisors are trading in the stocks they are recommending, with vague terms such as “interesting” or “worth exploring”, and profiting at the cost of retail investors.”