After the AP Twitter account was hacked yesterday, Slate columnist Matthew Yglesias asked if there might be a profit in sending out fake tweets from supposedly real news sources. He was only half-joking.
The tweet, which said that President Barack Obama had been injured in a terrorist attack on the White House, shook the stock market. The Dow Jones Industrial Average dropped 146 points, from about 14,700 to 14,554, essentially making some $200 billion disappear.
Can Tiny Tweets Predict Financial Markets?
That's a lot of dough down the drain. Can anyone profit from that? The answer is yes.
A sophisticated hacker who "shorts" Apple, that is, borrows stock and sells it in the hopes that the price will drop, and then buys it back at the reduced price, would profit. Imagine that person hacking into Apple's Twitter account and tweeting something that makes other investors nervous. They sell, the hacker profits in a matter of minutes.
This is one reason that the Securities and Exchange Commission is looking into trading activity just before the tweet and after.