The rise to prominence of so-called 'meme stocks' is creating 'false markets' that should be actively avoided, according to Man Group CEO Luke Ellis.
on Wednesday, Ellis said Man Group uses technological screening and natural language processing to identify the stocks being touted on sites such as Reddit and "avoid trading the names that they're super excited about because they're mostly creating false markets."
Some of the surging share prices have translated into tangible results for the companies involved. Cinema chainrecently saw its credit rating upgraded by S&P after using Reddit-fueled share offerings to raise capital and make a debt restructuring program less likely. "I think it becomes really interesting when companies then take advantage of what are otherwise false share prices and issue stock, and I think we're going to see a radical shift in the cinema industry because one of the cinema chains has been able to use the pumping of the stocks on 'Wallstreetbets' in order to go and raise capital," Ellis said.
"That's going to put them at a significant competitive advantage compared to other people in their industry." However, Ellis added that his FTSE 250-listed firm, which manages around $124 billion in assets, was interested in up to 10,000 stocks around the world and therefore found it "easy to avoid the ones where we think it's a false market."
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