In recent months, several companies have made the switch from using paid PR wire services for releasing financial disclosure over to using their own websites and resources for disclosure. The New York Stock Exchange changed its rules this past year, no longer requiring that companies use press releases as a means of disclosure. This explains why companies are slowly starting to drop the middleman. Microsoft is the latest company to do this. Should others follow suit? Or should they stick to what works now through traditional methods?
Before Microsoft fully made the switch, it sent out an advisory to notify investors that the company would no longer be using a paid PR wire service. The advisory included a link to Microsoft’s IR website, indicating the new location for announcements. The IR website will now be the main resource for investors and other stakeholders to obtain information. RSS feed, e-mail alerts, and other links are incorporated into the site as tools. According to Dominic Jones, Microsoft has followed the guidelines of 2008 provided by the SEC by announcing how and what would be disclosed from their company.
From the perspective of Cathy Tamraz, chairman and CEO of Business Wire, the terms of Regulation FD are being used very loosely in Microsoft’s case. She states that Microsoft sent out an advisory the day before earnings would be released to the IR website, without identifying a time for the release. In the SEC’s 2008 Interpretive Guidance Release, it states that companies can disclose earnings on corporate websites, if that is the recognized method of disclosure, apparent to others, and have been that method for some time now. Microsoft announced that its corporate IR website would be used for disclosure the day before releases were ready. Was this enough time to be considered a standard source for disclosure? Another problem that Tamraz noticed with Microsoft was that the releases were not all simultaneous, causing confusion and concern among investors.
Perhaps PR wire service companies are just bitter that they are no longer needed. They make most of their profit off of financial disclosure releases and will lose a lot of money if companies ditch them. Business Wire has already retaliated by refusing to distribute any advisory statements. Perhaps Microsoft did jump too quickly into web disclosure and it was a little uncoordinated in releasing earnings, but cutting out the middleman saves money.
Microsoft: setting an example of how you can do things your way, or an example of how to lose your PR wire company?
Hewlett-Packard Company has probably topped the standards of our innovators, Sun Microsystems and Dell Inc. It has gone above and beyond the uses of the corporate blog and Twitter updates. Since social media was new to HP, and investors in general, Ethan Bauley, editor of HP’s corporate blog, began by posting a guide of what was to be expected in the new method of disclosure. He also posted links to sites where earning results would be shared, such as StockTwits, Business Wire, HP’s IR websites, and the regulars: Facebook and Twitter.
Dominic Jones, founder of IRWebReport.com and president of IR Web Reporting International Inc., recapped a play-by-play of HP’s 3rd Quarter Earnings. First, Bauley created a guide for viewers on how results would be released. This allowed for familiarization and clarity. Second, earnings results were disclosed on HP’s StockTwits IR and Twitter accounts. HP was an innovator in its own way, in that it was the first company to use StockTwits IR service to announce its earnings. Third, a second blog post was published summarizing the earnings release presentation. The presentation was also linked in the post to Slideshare available for viewing and downloading. Fourth, a link to the second blog post was embedded on Facebook. Fifth, a third blog post was published the following day. It focused on everything else that was covered outside of the financial earnings. The transcript of the earnings conference call was made available on the IR website and Scribd (a document-sharing website) as well.
HP is unique because they integrated traditional means of disclosure into newer forms of social media. For example, earnings were announced through PR wire services, its newsroom, as well as on HP’s corporate site.
HP wove a complex web through social media for investor relations. It was very involved in covering all aspects of social media. Companies as thorough as HP allow for many opportunities for shareholders to seek information in a matter of minutes.
Why bother with Twitter and getting into social media? Especially when it involves shareholders? They’ll get that information from traditional sources, right? That may be true, but times are changing. People want information fast and now. They aren’t interested in searching through corporate websites to find a small piece of information. They are on Twitter, Facebook, Business Wire, StockTwits, etc. People are choosing a central location to get information from several companies at once.
One way to help your company get started is to use a news wire service such as, PR Newswire. It offers several tools including distribution to media, IR web sites, and web casting services. The Vintage Filings division of PR Newswire helps IROs with SEC rules and regulations by keeping them informed of any changes. Several thousand companies use PR Newswire (and other newswires as well) to disclose financial earnings throughout the world.
Use Twitter for your shareholders. It’s the easiest and safest way to incorporate social media into your organization. Make Twitter available on your website. People need to know that you are on Twitter. Not many companies are using Twitter for discussions with investors and shareholders, but rather use it for announcements or linking back to the IR website to answer questions.
Use as many social media tools as possible. This will allow for investors to choose which tool they favor. It is important for companies to be diverse, to branch out into several forms of social media. If your company prefers to only use one method (perhaps Twitter to test the water), ensure that it contains good content. Ask yourself: is your content full of fluff or packed with meat? Engage with your investors to keep them interested. Use blogs, Facebook, and Twitter as a basis for your company’s social media tools. Topics can be general and should serve the purpose of drawing attention to what your company is doing. Video is growing increasingly popular in social media tactics. Investors have the opportunity to share concepts from their point of view through this medium.
Nervous about slipping up on Twitter and disclosing something you shouldn’t? Talk to your legal team and work together to set up boundaries. Richard Brewer-Hay of eBay writes for the company’s blog and Twitter account. He had tweeted three earnings calls and other events without notifying the legal team first. Concerned about legal action, lawyers for eBay created social media guidelines before Tweets were posted about first quarter earnings. Before any event announcement four legal disclaimers will also be tweeted. For the blog, an additional page was established for legal purposes.
While it is comfortable to stick with what works, try something new. Who knows, you may be taking the next big step for your company’s future.
Who started it? Who was brave enough to bare all through the wide-open windows of social media, and share earnings and finances for the entire world to see? On June 30, 2007, Sun Microsystems reported finances through its IR website and RSS feeds before sending a traditional press release. This was the first known company to disclose investor information outside of the conventional format of distribution. Over the years, Sun Microsystems (now merged with Oracle) has created a place online specifically for investors entitled “Official Investor Communications Portal.” It is a division of the original IR website that is designed for investors to gather information from RSS feeds and Twitter. The new portal contains sections for SEC filings, earnings releases, financial information, and more. At the bottom of each page people can subscribe to RSS feeds as well as bookmark and share to several social media outlets besides Twitter.
Shortly after Sun Microsystems’ show of bravery, Dell entered the world of social media and investor relations. In November 2007 the Dell Shares blog was created for Dell’s IR department. Video interviews, or Vlogs, with executives of Dell were included in addition to blog posts. Vlogs are posted to YouTube as well in order to reach out to a wider audience and help with viral marketing. Robert Williams, the director of IR at Dell claims that the blogs cut down time spent by employees clarifying financial outcomes and progress. This blog allows shareholders and stakeholders to comprehend what Dell is really about and to be familiar with its financial structure and functions. Williams states three reasons why larger companies are not involved in IR blogs like Dell is:
- Few people in IR department
- Not enough knowledge about blogs
- They do not want to risk wrong disclosure and lawsuits.
As early innovators of using social media in investor relations, Sun Microsystems and Dell have set the stage for future organizations.
Investor relations and social media have a lot in common with Croc shoes. Crocs are ugly. IR can get ugly with improper disclosure and fraud. Crocs come in many styles. There are many styles/tools of social media that can be used with IR. Crocs look unconventional, but are comfortable. It’s unconventional that IR is moving online, but once organizations get into it, they will feel more comfortable with incorporating it. Many people are self-conscience about the way they will look if they wear Crocs. Many companies are self-conscience about how they will use social media with IR.
Organizations are hesitant to use social media in investor relations due to the controversial nature of its contents. Some do not view it as beneficial for investor relations and see social tools such as Twitter as taking up too much time and as a useless source for shareholders. Others do not think this type of information should be available to the public in the first place. Another reason why organizations are hesitant to use social media with shareholders has to deal with legal matters. Regulations come from the SEC, state regulators, and stock exchanges. Accidentally sharing information with the public not approved by the SEC could result in bad PR, lawsuits, and fines.
Although many corporate websites include a section about investor relations, they overlook the uses of social media. For example, most of Stanley Black & Decker’s corporate website pages contain links to the company’s Facebook and Twitter sites. However, no links were in the investor relations section of the website. Dominic Jones believes the reason for this is that investor relations departments are concentrating solely on people involved in finance. The problem is that they do not realize that their potential investors are using social media such as social networking sites, and are thus being ignored.
It is important for companies to understand that even though sharing investor relation information online can be tricky, it is how the professional communication world is modernizing. According to reports from companies, they spend between $15,000 and $50,000 every year on press releases to meet regulations. By moving this information online and available to investors, the process will be much more cost-effective. Companies like Intel Corp have taken baby steps in using the Internet for investor relations. Shareholders are now encouraged to ask questions online and give input to Intel, and over time they may incorporate Twitter to share IR updates.
Like skeptics of Crocs who will not buy them until they see of benefits of them, organizations that do not see the benefits of using social media with shareholders are not going to combine them together.
Remember when GPS systems didn’t exist? If you wanted to go somewhere spur-of-the-moment or needed to get somewhere fast, but didn’t know how to get there, you had to wait and call someone for directions or stop by a gas station and ask someone. When GPS navigation systems came into the picture (or even MapQuest), we could find what we were looking for in a matter of seconds. Social media is now our GPS for news and information. We can get information instantly by going online and finding what we need within a few clicks.
Virtually every company and organization wanting a leg up on their competition incorporates social media to enhance relationships with customers, employees, and other stakeholders. Only recently have they begun to incorporate social media to communicate with their shareholders. One reason for this is that the SEC now recognizes blogs, company websites, and other online channels as sources of financial information for investors and the public (as long as regulations are followed). In fact, the SEC has been an advocate of electronic reporting since the 1980s when it employed the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. A 2008 SEC report stated that using social media is modern, transparent, fast, and cost-effective with investors as well as the public.
According to Darrell Heaps, co-founder and CEO of Q4 Web Systems, three quarters of investors are using corporate websites on a daily or weekly basis. This shows that investors are using the Internet as a credible source of information. Heaps warns that organizations do not share information that has not been approved of disclosure; otherwise both the company and the investors are at risk of legal problems.
Companies can reach their shareholders through several distinct social media tools designed specifically for investor relations. One of these tools is Seeking Alpha, the biggest online collection of financial blogs and articles. Another tool is StockTwits, which searches Twitter for stock ticker symbols. Wikinvest is the financial version of a wiki and is an investment information site open for collaboration that focuses on concepts and contexts instead of only data. Slideshare and DocStoc are document-sharing sites that are currently gaining popularity in investor relations. These sites allow companies to share presentations, financial information, and other company reports. Their purpose is to be content driven and to make information easily available to other investors and the public.
As our ways of getting directions have changed over the years, our ways of getting information have changed as well. To keep up with the ever-changing world of communication and technology, organizations are implementing social media to communicate with shareholders. Companies who do this are viewed as transparent, informative, and innovative.