$20B Lost? A Good Story vs. The Facts

We like a good story more than we like facts.

Here's proof, using this week's wild happenings at Twitter and a sample of top headlines from today:

Did the stock "tank" and "dive," or is it just a good story?

Let's find out.

The backstory: Twitter & Verification

Since the dawn of time (aka 2009), Twitter verification has been reserved for A-list celebrities, mega-corporations, journalists. Verified accounts have a little check mark next to their names and indicate that they are noteworthy.

Since this is capitalism, you can also buy your way to verification.

The Atlantic reported that spending roughly $15,000 in advertising over 3 months would get your account verified.

After buying Twitter, Elon Musk opened up "verification" to any account willing to pay an $8/month fee.

Naturally, when verification price tag changed to a mere $8 (a ~99.95% discount) 10s of thousands of accounts happily bought in.

Among these accounts are a swath of newly-verified "parody" accounts pretending to be Elon Musk, celebrities, politicians, and - you guessed it - corporations.

Here's a very small sample of parody tweets from official looking accounts:

(a rare double parody account interaction. Google that story for a wild ride)

The Ingredients of a Scandal: Eli Lilly & The Twitter Troll

One Twitter account pretended to be big pharma's Eli Lilly and Company ($LLY). The account looks exactly like an Eli Lilly official account. We will call them "The Twitter Troll."

One of these accounts is the real Eli Lilly and Company account, the other is The Twitter Troll. Good luck figuring it out:

Normally a verified check mark would make it obvious which account is real and which is fake. But not with the $8/mo plan! This becomes a problem for Eli Lilly.

Eli Lilly is a big company.

One of the top 200 in the world.

They've done some great things, like being the first to mass-produce the polio vaccine.

They've also done some less-great things, including paying $515 million in criminal fines for illegally marketing anti-psychotic drug olanzapine (oops!).

Why the Internet Hates Eli Lilly & Company

In recent years Eli Lilly has become one of the internet's (and Bernie Sanders') favorite punching bags, mostly due to the high-and-rising-higher cost of insulin in the USA.

The price of insulin in the USA is very expensive compared to other countries. It also makes Eli Lilly a lot of mony.

Insulin sales account for $1.51 Billion in revenue over the last 9 months (source: LLY earnings report).

Our Twitter troll decided it was time to take some action.

The Main Event

Congrats for scrolling this far, because it's about to get juicy.

The Twitter Troll tweets a tweet for the history books. Remember they look exactly like an official Eli Lilly Account. The tweet simply reads:

This is a troll/parody account. Insulin is not free.

But it now looks to the world that Eli Lilly & Company, ranked 123 on the Forbes 500 list, is giving away a multi-billion dollar product FOR FREE.

They aren't. But the market reacts.

The Market Reacts (probably)

The $LLY share price drops rapidly over the course of 90 minutes, wiping out ~$20 Billion in market cap. The world assumes it is triggered by this Tweet, and I see no evidence other factors were at play. I'm sure someone will get a PhD studying to this price swing.

The stock's price curve looks dramatic. It sure looks like The Twitter Troll's tweet scared the market!

This is A Story™, but What are The Facts™?

When you look at the headlines and the stock price, it is dramatic. $20B of market cap wiped away in just 90 minutes.

$20B is a lot of money. Market cap is kinda fake money, though. It's the stock price multiplied by all the number shares of that stock. It doesn't directly reflect actual money in the bank or money changing hands. It's real but only kinda sorta.

The news headlines describe focus on a stock prices "diving" and "tanking."

A closer look shows that the price dropped roughly 5% and then bounced, ultimately closing the day about 3.3% down. This isn't insignificant, but the last couple years have been a lot more dramatic.

Also, Eli Lilly stock is up nearly 30% YTD, a 3.3% one-day drop isn't significant on the charts.

It seems to me that the news just needs another story, and this is a convenient one. The world is eating up Twitter stories right now (myself included) and these headlines are sure to get clicks. Yes, there was a drop. We don't truly know the whole story.

Is There a Different Story?

To be fair, the one-day drop is by all available evidence caused by The Twitter Troll.

But, I don't think the price dropped because of misinformation. I think the news outlets and the trending social media posts have it wrong.

I believe that investors (and Eli Lilly) don't like it when insulin prices become a public talking point. It threatens their valuation.

The US House passed the "Affordable Insulin Now Act" - a bill that would cap the price of insulin. The senate blocked it.

If an insulin price-cap were instituted, it surely would impact Eli Lilly's profits.

Media and social pressure on insulin prices increases the chance a similar bill eventually passes. This makes investors nervous. Nervous investors lead to lower stock prices.

Another Good Story

The idea of a Twitter Troll triggering a $20 Billion USD evaporation of a company's market cap is a fun idea. I want to live in a world where one person can stick it to Big Pharma with a simple tweet.

To me, however, the case of the $20B evaporation looks more like market factors & nervous investors and less like Elon Musk and The Twitter Troll.