Silver prices soared Monday boosting a small Canadian firm’s stock by 139%
Despite warnings that it could all end in tears, it seems the retail investor movement on Reddit is not done yet.
Following the surge in the value of shares in US retailer GameStop and other companies last week, which hit hedge funds that were shorting the stocks, users of the internet forum are at it again.
This time silver was in focus with prices jumping close to an 8-year high after a weekend buying frenzy. Futures were up 13% to $30.35 an ounze on the Comex. It was the highest price since 2013.
Although prices eased in later trading, the boost for the commodity gave one small Canadian miner a surge just when it was selling stock.
As trading volume soared, shares in Avino Silver & Gold Mines Ltd. jumped as much as 129% Monday and closed up 50% at $1.85 in New York.
Last week, the Vancouver-based firm announced plans to sell up to $25 million of newly-issued shares into the US market.
David Wolfin is the firm’s CEO and has a large stake in the business that his father started more than 50 years ago.
“People say when I’m doing presentations, do you have any skin in the game? And I say, I have blood, sweat and tears,” he told Bloomberg. “I’ve been building my position for a long time. So I’m thrilled.”
Who’s that behind the mask?
The recent high-profile activism on Reddit has created some mystery surrounding the identity of those fuelling the surges.
While many of those jumping on the bandwagon will be driven purely by ‘a way to make a fast buck’ – leading to the warnings from experienced investors – others are focused on battering the banks and hedge funds.
There is also speculation among Reddit users that hedge funds may be playing them at their own game – along with multiple other conspiracy theories.
The activism has caught the attention of regulators who are concerned about potential market manipulation.
A statement from the Commodities Futures Trading Commission:
“The CFTC is closely monitoring recent activity in the silver markets,” said Acting Chairman Behnam. “The Commission is communicating with fellow regulators, the exchanges, and stakeholders to address any potential threats to the integrity of the derivatives markets for silver, and remains vigilant in surveilling these markets for fraud and manipulation.”
Canadian regulators issued a more general statement warning about unregulated investment advice in online forums.
As Grant White, portfolio manager and investment advisor at Endeavour Wealth, iA Securities, told WP last week after the GameStop surge:
“At some point this goes bad. It’s inevitable it’s going to go bad for a group of people and, truthfully, it’s probably going to end up being a group of retail investors that, unfortunately, get hurt the worst.”