ASIC is following in the steps of the UK’s FCA and is launching a consumer campaign to raise awareness of the risk associated with investment hype to coincide with the Australian release of Dumb Money, a new film about the GameStop short squeeze incident in 2021. The film is directed by Craig Gillespie and written by Lauren Schuker Blum and Rebecca Angelo, featuring an ensemble cast including Paul Dano, America Ferrera and Seth Rogen.

The campaign, which urges retail investors to carefully research online investment opportunities, includes a new cinema advertisement that will air nationally from October 26, at screenings of the film. The advert references burning money to raise awareness of hype in high-risk investments and advises viewers “to invest in facts, don’t get burnt by the hype!”.

ASIC Chief Executive Officer Warren Day said: “Before choosing to invest, people should familiarise themselves with the golden rules of investing and understand the associated risks. They shouldn’t believe the hype – if an investment sounds too good to be true, it probably is.

“If an investment sounds too good to be true, it probably is.”

ASIC Chief Executive Officer Warren Day

“First-time investors should be particularly cautious and aware of the inherent volatility and complexities of market trading. Speculative stocks, by nature, are high risk, high reward, with uncertain prospects. With high-risk investments, you should be prepared to lose all of your money,” cautioned Day.

“We encourage investors to pause and reflect before investing. Don’t get caught up in the hype. Take some time to research investment decisions, go to trusted sources for information, including moneysmart.gov.au,” Mr Day added.

Retail investors who use social media to ramp stock prices, ‘pump and dump’ shares and engage in market manipulation may be in breach of Australian financial services laws. Additionally, online crypto scams and apps that seek to “gamify” share trading also remain on ASIC’s priority list.

ASIC’s market surveillance team continually monitors market movements in real time and will take enforcement action where misconduct is identified.

Background to the GameStop incident

In early 2021, US video game retailer GameStop was at the center of a speculative frenzy between major professional investors and small-scale individual investors. Retail investors used social media (for example Reddit group WallStreetBets) to “short squeeze” NYSE-listed GameStop in a perceived David v. Goliath battle with professionals to counteract short positions held by hedge funds.

This large amount of retail buying saw GameStop’s share price rise by around 2,000% in January 2021. With massive volumes of shares changing hands daily, and driven by rumors, the share price fluctuated wildly for months, leaving some investors, large and small, severely out of pocket.

ASIC said it believes this type of short squeeze is unlikely to occur to the same extent in Australia due to its regulatory framework, controls that the Australian exchanges have in place, and market practice.