The SEC has officially announced that posting corporate
information on social networking sites such as Facebook and Twitter are equal
to releasing information via a news release and on the corporate website. In
general, the SEC stipulates that companies must make material information
available to all investors simultaneously via SEC filing or press release.
The SEC made the move following an investigation into the
Facebook posting of Netflix CEO Reed Hastings. He bragged that his company's
monthly viewing had exceeded one billion hours for the first time. As a result
of posting this information on Facebook, Netflix stock promptly closed higher
during that trading day.
The SEC decided to loosen its rules for disclosing
information and decided not to start any proceedings against Hastings.
Although this is in itself good news, it is not as
straightforward as it looks. The catch is that a company must tell its investors
which outlets it is intending to use. Ironically enough, the best way to do
this is via a press release!
The SEC announcement gives companies more channels to
disseminate news. As I see it, a publicly-traded company cannot replace press
releases with postings on Facebook and Twitter. Furthermore, the legal
department of the company needs to review any posts concerning the company
before posting them.
My advice? Be wise! Use official news distribution channels
such as PRNewswire to inform your investors, customers and the public at large.
Before distributing a press release, the legal department of PRN reviews it and
will therefore ensure that your press release complies with the SEC’s rules and
regulations. This also means that a CEO cannot “brag” anymore, but needs to
state the (dry) facts.
Companies also need to learn how their investors want to
receive news. Not everybody uses Facebook and Twitter, and even if they do,
they normally use it for informal purposes. Especially institutional investors will
find news the old-fashioned way (using EDGAR, checking press releases and
corporate websites), since that’s the way they research and keep up. Private
investors (especially those interested in penny stocks) are more likely to embrace
Facebook and Twitter for updates and news.
The SEC did not specify what steps a company needs to take
for using Facebook, Twitter, et al. It is also unclear what is material
information and what not.
Until the SEC formulates strict guidelines, my advice for
companies:
1) Write an official press release
2) Have it approved by the legal department
3) Distribute it via PRN et al + post it on the corporate
website
4) Post the press release on the company’s Facebook page,
Twitter account, LinkedIn page, Pinterest account.
5) Put it on your corporate blog
(Image courtesy of dailyfinance)
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