For the past two and a half years, CFOs and tech chiefs have been worried about a "GameStop attack" on their own companies. Now, some of them are turning to former Israeli intelligence leaders to set up defenses against both short sellers and Bored Apes.
Ella Tkach-Dreazen is one of these leaders. A former Israeli diplomat and intelligence officer who specializes in uncovering digital financial manipulation, Tkach-Dreazen has a term for financial actions C-suites around the country have come to fear.
"This is the meme stock era," said Tkach-Dreazen. "Today's investors organize on Reddit and StockTwits, trade with Robin Hood, and bet against Wall Street."
Tkach-Dreazen may just be right. Retail investors now comprise about a quarter of all traders in the United States, and as their numbers have grown, so too has their power to disrupt the market. The proliferation of mobile applications like Robin Hood and Acorns, which allow traders to bypass major institutions and trade stocks directly, has only made it easier for individual investors to shape the market to their liking.
This played out most infamously in early 2021 when a coalition of retail investors organized online to stage an attack on public stock in GameStop ($GME), a moribund video game retail store whose shares were trading at the time for less than $20. In January 2021, the group began rapidly buying and selling shares in GameStop. By the end of the month, the company's stock price had soared to nearly $350, inflicting significant damage on the balance sheets and credibility of large institutional traders who had been shorting the stock in prior months—and, in the process, generating a fortune for a small group of savvy retail investors.
When similar actions were launched against former giants Blackberry and AMC, two more companies closely associated with Y2K-era culture and early digital-age nostalgia, something quickly became clear to Tkach-Dreazen.
"These actors are seeking returns that aren't just monetary. To them, a successful campaign is as much an investment as it is an internet meme," she added.
To the companies and investors on the receiving end of these actions, the result is anything but a laugh. During the GameStop incident, institutional short sellers had no choice but to enter the trading morass and purchase additional shares at artificially elevated prices to cover their positions, further inflating GME stock prices and driving a vicious cycle that evaporated future returns. One investment firm that had been shorting GameStop prior to the campaign, Melvin Capital, lost an estimated 30% of its total value during the short squeeze.
Tkach-Dreazen and Ory Segev, a leading data and systems expert, founded a new artificial intelligence (AI)-based startup, Koios, to attempt to address these challenges for companies of all sizes.
In early 2024, Koios launched a new platform that Segev said would provide companies with real-time insights into online conversations around their stock.
"We help them stay one step ahead of digital adversaries interested in artificially lowering the value of their stock and maligning their standing with the public," said Segev, who also serves as Koios' CEO.
Meme traders are not the only entities carrying out these kinds of operations. In the age of AI and easy access to the markets, meme traders could be just the tip of an iceberg looming for public companies around the world.
"In many cases, we've uncovered corporate competitors, adversarial short sellers and even foreign governments underwriting meme and other manipulation campaigns to damage competitors and advance their interests," said Tkach-Dreazen. "These campaigns can often involve the use of digital bots, spam accounts, and other damaging but easily traceable tools."
Tkach-Dreazen believes that Koios could even the score.
The company, she said, offers a two-phased service: insights and action.
First, Koios collects, tracks, and analyzes chatter about a given company on social media and the broader web, according to Tkach-Dreazen. Koios uses AI to analyze the volume and sentiment of these conversations and detect anomalous conversations, which, according to Tkach-Dreazen, can often presage a forthcoming attack.
Using this information, Koios then provides companies with recommendations for countering burgeoning campaigns, Tkach-Dreazen said. These strategies could include engaging influencers, initiating proactive public relations strategies, engaging attorneys, and addressing artificial changes in investor sentiment.
Koios has detected and unmasked these types of bad actors in several instances.
In one such case, a publicly traded company, which asked to withhold its name for privacy concerns, approached Koios with a unique conundrum: A self-proclaimed think tank had published a fabricated research report about the company to spook investors and spark a short. The idea worked; within days of the report's release, the company had lost hundreds of millions in market capitalization.
By tracing online conversations about the company, Koios was able to uncover the authors of the report and the group that had commissioned it. The company took legal action against these individuals and secured the removal of the report from the internet.
The episode, Tkach-Dreazen said, points to an emerging trend.
"When it comes to initiating a short or pressuring a corporate board, adversaries will leave no stone unturned and use whatever technology they need to get the job done," she said.
"This is not your grandfather's corporate espionage," she continued.
