In this column I dig into new research showing just how much social media hype can shape the early performance of initial public offerings. A study in the Journal of Behavioral Finance looked at nearly 400 IPOs in India and found that endorsements from macro finfluencers, those with more than 200,000 followers, were associated with astonishingly strong first-day results. Their backed IPOs closed almost 50 per cent above the offer price compared with roughly 31 per cent for the broader group. Even six months later, performance remained significantly higher. What stood out to me was that institutional investors did not behave any differently. It was retail investors who appeared to respond to the hype, suggesting that finfluencers have quietly become part of the modern IPO roadshow.
I also explore what this shift means for regulators and everyday investors. Our capital markets framework was built for a world of licensed professionals, not anonymous content creators with ring lights and global audiences. Some finfluencers genuinely help people learn to budget or understand fees. Others promote products they barely understand. And celebrities with massive followings can add yet another layer of confusion. In the column I argue that since finfluencers are not going away, investors need to treat information literacy as part of financial literacy. Likes and follower counts are not a substitute for credibility. Until the rules catch up, we have to sharpen our ability to separate useful insight from noise dressed up as expertise.
Preet Banerjee
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