Has Metro Bank’s Stock Price Been The Victim Of Fake News?
Metro Bank’s shareholders have been put through the wringer this year. In January, the challenger bank’s share price reached a comfortable 2202p, but by 13 May it had fallen to 475p per share.
And now traders have begun speculating that the latest price dip is due to a ‘fake news’ rumour that was spread on social networking platform WhatsApp last month.
Collapse Fake News?
In a message that was circulated among thousands of users, an anonymous source warned that Metro Bank was on the verge of collapse and advised customers to withdraw their money and items from safety deposit boxes before the bank went into administration.
In response, scores of customers made their way to Metro Bank branches to remove their investments and valuables, in scenes reminiscent of the Northern Rock crisis of 2007-2008.
The bank was quick to issue a statement reassuring customers and shareholders that “there is no truth to these rumours and we want to reassure our customers that there is no reason to be concerned.”
Within a couple of days, the panic appeared to have worn off, and Metro Bank’s share price shot up by more than 12 per cent on the morning of May 15, as savvy day traders saw the opportunity to snap up a bargain.
Was Metro Bank Hoax Victim?
Some reports have suggested that the WhatsApp rumours were designed to cause panic and artificially lower the bank’s stock price – a theory which tracks with a spike in short selling activity in early May.
But the truth is that Metro Bank has been losing the confidence of its financial backers and shareholders for more than a year. The bank’s shares have fallen by more than 80 per cent over the past year, after a series of miscalculations and profit warnings.
In January, it was revealed that an accounting error led the bank to underestimate the risk level of some of its commercial loans, adding that it was seeking £350m in funding to address the risk gap.
At the time of writing, this £350m appears to have been secured, and chief executive Craig Donaldson said that there are no plans to close any of the bank’s 66 branches.
Meanwhile, the WhatsApp rumours have given traders a unique opportunity to pick up stock at heavily discounted rates, albeit with a certain amount of risk attached.