According to a recent study, nearly 80% of Fortune 500 companies actively use social media to communicate with their customers. Not surprisingly, many public companies have also started using social networks to communicate with investors, albeit cautiously. Still, the idea of more open and public communication with investors via social media can fill a chief compliance officer with dread.
What’s needed is some concrete examples of SEC-approved social media investor communications to help IR and compliance departments feel more comfortable using new technology. Twitter, now a public company, could be the case study that ushers us into a new age of investor communications.
On September 12th, Twitter disrupted the social media conversation by sending the following tweet to its 24 million followers:
Twitter leaned on new Jobs Act legislation that allows companies with annual revenue under $1 billion to file confidentially. The company then took to Twitter to announce it had confidentially filed papers to go public. Twitter’s update was re-tweeted nearly 15,000 times – a gigantic amount by any measure.
On October 3rd, Twitter sent out a second IPO-related tweet, confirming that its S-1 would be filed with the SEC and publicly available “momentarily.”
Both tweets included a disclosure stating that the tweets did not “constitute an offer of any securities for sale. Some critics took issue with the seemingly contradictory approach of a confidential filing followed by a public announcement, but while some think this approach may deviate from the primary intentions behind creation of the JOBS Act, it certainly isn’t breaking any rules.
What Twitter might be preparing us for is a case study on how public companies can use social media to satisfy Reg FD requirements, and more broadly, to communicate with investors through social media. Indeed, why wouldn’t Twitter want to pioneer investor relations via their own platform?
Picking Up Where Netflix Left Off
In April, Netflix broke major ground when its CEO, Reed Hastings, was cleared by the SEC after announcing on his personal Facebook that Netflix’s monthly viewership had exceeded 1 billion hours for the first time ever in a single month. The stock rose sharply following his comments and the SEC announced it was considering bringing charges against Hastings for violating Reg FD. After much deliberation, the SEC decided not to bring charges against the Netflix CEO and instead issued a press release providing guidance to other issuers — essentially giving all public companies permission to:
“…use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.”
Netflix filed a Form 8-K after being cleared by the SEC, but in the form, Netflix listed more than 10 mediums that it intends to disclose material information through with respect to Reg FD. This list included both traditional channels (such as press releases and earnings calls), as well as social channels (such as Facebook and Twitter). While the guidance broke new ground, Netflix’s filing opened the door to further confusion and even more questions about how public companies are required to communicate material information to investors.
While the SEC and FINRA have made great strides in adapting regulations to a social-media world, publicly traded companies are still struggling to navigate the grey areas of compliance and best practices in this area.
Twitter has a significant opportunity to push the boundaries of the grey social media compliance environment, and it’s in their interest to clarify these rules so more public companies use their platform to communicate with investors. The performance of the stock might also give IR and communications professionals a glimpse inside how open communication with investors through social networks can impact share price.
For many publicly traded companies, waiting for concrete examples that demonstrate how to drive investor communications though social media, Twitter may just may be the case study they have been waiting for.
–Stephanie Dressler, Vice President, Digital & Brand Strategy