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Published November 16^th 2018

Does Twitter Conversation Have an Effect on Tesla’s Stock Price?

When Elon Musk tweeted about taking Tesla private, I wondered: How much, if at all, can social media influence stock prices? Combining Twitter data and Tesla’s stock price data, I went searching for an answer.

As a research analyst in Brandwatch’s Strategy & Insights team, I spend my day helping clients to make business decisions and to understand how social media affects the real world. So it was only natural that I decided to take on this Tesla-themed task.

We know Trump tweets have negatively influenced stocks before. But is this true more generally? Can we turn to Twitter to explain movements in stock prices?

To answer this question, I first looked at conversations on Twitter around Tesla.

Three key peaks

Using Brandwatch Analytics, I pulled together all tweets from this year that mentioned both Elon Musk and Tesla. I wanted to know how Elon Musk’s actions influenced Tesla’s stock price, so all conversation mentioning both would be relevant. I then delved into the stories behind the three tallest peaks.

The first of the conversation peaks happened in February, when SpaceX – another company of which Elon Musk is CEO – successfully launched a Tesla Roadster into space. Stephen Fry posted the most popular tweet around this, in which he congratulated Elon Musk, Tesla, and SpaceX on their success.

The tallest peak of 2018 so far occurred on April 1st, when Elon Musk posted an April Fools’ joke about Tesla going bankrupt.

He followed up with two more tweets, one of them being a photo of himself apparently drunk on ‘Teslaquilla’ holding up a sign that read ‘bankwupt’.

And then the third peak, which brings us back to the idea behind this article. In August, Elon Musk tweeted that he is considering taking Tesla private at $420.

News-savvy readers will know that it was more than stock prices affected by this tweet – a few days ago, Elon Musk was replaced as Tesla’s board chair

Peaks vs stock price

Now that I had identified the three most discussed stories on Twitter, I turned to the stock market. More specifically, Tesla’s stock price data for 2018 so far.

I was interested in the areas that I highlighted in blue here – the three days during which Twitter conversation peaked. And I’ll be honest: when I first looked at this, it didn’t seem so exciting. The largest price swings did not happen on the three days when Twitter conversation peaked, after all.

But from my experience in research, I know that sometimes insights aren’t immediately obvious. Sometimes it takes a little work to uncover trends.

I dug a little deeper. First, I checked the three days for other news surrounding Tesla – I wanted to rule out a stock price movement due to other factors. For example, there could have been an official company statement affecting perceptions around Tesla’s value that day. This, however, was not the case.

My next step was to calculate the percentage change of the stock price between days.

On average, the day-to-day change in Tesla stock prices was 2.4 percent – we would expect it to vary by that much on any given day.

On the three days when Twitter conversation was raging, the price change was higher than 2.4 percent. Actually, for two out of the three days, it was quite a lot higher: double and quadruple!

So where does this leave us with our question?

Does Twitter conversation affect Tesla’s stock prices?

I think we can safely say that Twitter conversation and stock prices are connected. When Elon Musk tweeted about topics like financial performance or company structure, Tesla’s stock price adjusted according to the tone of his post. Whether this holds true for other companies would be interesting to explore – better understanding the link between social media and finance would of course be an incredibly valuable endeavor.

Thinking about social data as part of the bigger picture is something we do in the Strategy & Insights team. Combining social data with, for example, data on weather, prices of goods and services, or, like in this analysis, stock prices is just one of the approaches we have taken in the past.

Why not get in touch to see what we can do?

Lena Höck

Research Analyst

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