The stocks chat market is heating up with the emergence of a couple of new players that want to clean up the “social trading” space.
With the emergence of social media came a new way of pumping and dumping. And along with that, a massive issue for regulators in policing it.
Hot Copper is by far Australia’s biggest stock chat forum, but it has evolved into a platform that enables mass pumping and dumping and has led to a number of defamation lawsuits against members.
The ASX is getting particularly tough on social media posts and has issued several orders to various posters to take down their content.
But Stocks in Play and Strawman are new to the stocks chat market and their strategy is to make members accountable for the stocks they plug and, in the case of Strawman, back it up with research.
Interestingly, Stocks in Play is founded by former Hot Copper man Tony Cunningham, who bought a stake in the stocks chat forum back in 1995 from founder Ron Gully.
Cunningham, who is also founder of Perth-based CPS Capital, sold out of Hot Copper in 2016 and has now launched Stocks in Play, which is growing quickly.
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The site has reached just under 6,000 members and is adding around 1,000 new members each month.
“It’s been really interesting getting back into the space,” Cunningham told Stockhead. “It’s a different landscape completely from three or four years ago.
“There’s probably about 30 or 40 pages like ASX Penny Stocks and ASX Small Caps and all these Facebook chat pages that are just huge.
“Some of them are 15,000 or 16,000 members. Some of the Bitcoin pages have 100,000 people on them. It dwarfs Hot Copper on a scale not seen before.”
Evolving market
Stocks in Play and Strawman are basically the next step in the stocks chat space.
“It’s a really simple and basic evolution,” Cunningham said.
“People are tired of losing money. With Strawman and Stocks in Play, everything you do is audited and your performance is ranked, whereas at Hot Copper there’s all these people that are really popular, but their performance is really poor.
“They’re just very noisy pump and dumpers.
“Hot Copper will always have its place. If I want to own a stock I’ll buy it and then I’ll go to Hot Copper and check what people are saying about it.
“But this more ‘social trading’, as we’re calling it, is a lot more popular and it’s extremely important to chase things down.”
Stocks in Play focuses on short-term speculative trading, while Strawman is more longer-term investment focused.
The way it works is that each time a person makes a stock recommendation, a theoretical buy or sell of $10,000 of that stock at the share price at the time is recorded and measured and when closed out is added to their overall reputation as a profit figure.
People can then follow their tipping profit history.
These performances are ranked on a leaderboard, which makes prominent the most successful tippers, rather than least successful ones.
“Our number one day trader, he’s put 1000 tips into the system, he gets it right 91 per cent of the time,” Cunningham said.
“His average win is about $200 to $300 each time he tips, but it’s still a significant dollar amount and to be right 91 per cent of the time is extraordinary.
“As you can imagine everyone is following him.”
Strawman, meanwhile, also encourages its members to back up their recommendations with a solid rationale.
“So beyond just having tips, for want of a better word, we actually also encourage people to write their investment thesis out,” founder and managing director Andrew Page told Stockhead.
“So you can create ‘straws’ on our platform that will sort of say not only ‘I recommend that you buy or sell this, but here’s why’ and they can add target prices.
“It’s not just a recommendation, but it’s the research as well and that also is peer reviewed by the community and ranked.”
Strawman launched last year and has just under 4,000 members, which is solely organic growth.
The company has also recently attracted venture capital group Black Nova, which is sinking “some serious resources” into Strawman.
With the solid cash backing, the company now has development and marketing teams in place and is rolling out some new features, such as a “new skin” and mobile optimisation.
“So once all that’s in place we’ll start doing a bit of marketing and we’re quite confident we’ll get to 50,000 [members] in Australia eventually,” Page said.
But Hot Copper managing director Jag Sanger isn’t worried about the competition.
“The reality is we are number one in Nielsen [ratings], we are three times the size of the AFR, we are two times the size of the ASX and every single stock chat forum that you can think of in Australia is either less than 1 per cent of our size, has approached us to buy them out or we’ve turned them back,” he told Stockhead.
“Having spent 30 years in media we are appropriately paranoid and respectful of competition.
“We fully expect things to change.
“We do the right things to make sure we’re providing the right service and there are one or two vectors that we are travelling along, but right now – and we do keep very close tabs on all of them – there isn’t a single stock chat service, as you put it, in Australia that is even at 1 per cent of our size.”