June 11, 2019
Tesla CEO Elon Musk has a reputation on Twitter for making wild claims about the company. This behavior ultimately led the U.S. Securities and Exchange Commission (SEC) to file a lawsuit against both the company and Musk for violating Regulation Fair Disclosure (Reg FD). In addition to hefty settlement payments and the loss of his chairman role, Musk agreed with the SEC that he would receive approval from a securities lawyer before sharing material news on social media. A few months later, the SEC claimed Musk was in violation of the original settlement terms and outlined specific items deemed material that require approval before disclosing.
The SEC first ruled on the use of social media in compliance with Reg FD after Netflix CEO Reed Hastings wrote in a July 2012 Facebook post that viewing on his company’s video-streaming service had “exceeded 1 billion hours for the first time.” The SEC later determined that Hastings wouldn’t face enforcement action and updated its guidance on how social media is “perfectly suitable” for communicating company information as long as investors are notified and access isn’t restricted.
Yet, after watching the Tesla social media case unfold, Investor Relations Officers may question why they or their CEO should use social media as part of their investor relations program. However, when the proper protocols are in place, social media can effectively serve as an additional channel to reach investors and other stakeholders.
Earlier this year, my colleague Lisa Rose participated in a National Investor Relations Institute webinar panel titled Investor Relations in the Evolving World of Social Media. The ideas below are condensed from the webinar.
Assuming you are just starting to think about embarking on a social media strategy for your investor relations program, below are four do’s and four don’ts to consider first.
- Do work with Corporate Communications – Post IR content under an existing, active corporate social media account. Create a process that ensures everyone understands and follows disclosure rules as they relate to material information and social media.
- Do amplify existing IR and ESG content on social media – Reinforce messaging by leveraging content such as prepared remarks during an earnings call, visuals in investor presentations and sustainability messaging that have been previously communicated through other channels.
- Do listen to social conversations – Use a social media listening tool to understand how your organization is perceived and what is shared, as well as to monitor for a potential crisis or activist situation.
- Do share content with additional stakeholders – Expand your reach on social media to include additional stakeholders (e.g., media, customers, employees) and market to the investment community to ensure financial content is accessible to more than just current investors and analysts following your filings.
- Don’t post on social media before publicly disclosing information through traditional channels – A general rule for sharing on social media is that any IR-related information that your organization has already properly disclosed publicly is appropriate for social media. Remember that Reg FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites.
- Don’t spin bad news – To avoid backlash from regulators and investors, stick to the facts. Avoid putting a positive “spin” on negative corporate or financial news.
- Don’t engage in investor conversations on social – Stay within disclosure rules by focusing on sharing content. Never argue with people or organizations with whom you disagree.
- Don’t post IR content intermittently – If you start to share IR content on social, post regularly because your audience will expect regular updates.
To sum it all up, social media for investor relations should be part of your corporate social media strategy. Always follow proper regulatory requirements and company policies. If you do not have a corporate social media strategy, establish one so you have the ground rules for how social media will be used by your organization and how it applies to your investor relations.
How can your organization get started on a social media strategy for IR? Send me an email to discuss.