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Investor Relations and Social Media - Time to Stop Denying the Apparent

por Mamie Funderburk (2018-12-19)


At this point, social media has been embraced by businesses as a useful and necessary tool. Companies are using Facebook, Twitter, LinkedIn, and a number of other social networking sites to market their wares, locate potential employees, and connect with potential customers and partners. On the flip side, consumers have taken to the social media-sphere in droves, sharing opinions about products and companies they are loyal or connected to in some way. Until recently, companies had yet to realize how powerful social media can be from an investor relations standpoint, but it is now becoming clear that if a company doesn't take control of IR, then investors and customers will.

The heavy regulations on disclosure coupled with the sheer speed with which information (good, bad, true or false) travels across social media platforms has kept many investor relations departments wary of using social media. There is no doubt that IR can be difficult and risky over these platforms, but if companies don't control and monitor the information, they risk damage from the words being spread by individuals across the online community.

In 2007, Eric Jackson used social media to make waves inside one of the largest companies on the web: Yahoo. In the online world, Jackson was a relative nobody. He ran a blog that garnered less than ten visits per day, and a Twitter account with a small following. One day, he decided to voice his opinion on Yahoo, a company that he held a total of 96 shares in. He wrote a post on his blog expressing his dissatisfaction with the management performance of Yahoo CEO Terry Semel, and included a few videos with his suggestions. He asked his fellow investors to band together for change, and his post went viral. Shortly thereafter, Jackson had built a pool of Yahoo investors that represented nearly three million shares of Yahoo. It wasn't long before Semel resigned his post as CEO, and Eric Jackson's efforts were considered the biggest contributing factor to Semel's demise.

This is only one small example, but one that some people know about. The moral of the story is that social media is here, it is powerful and it has put power back in the hands of the consumer. This type of power cannot and should not be ignored, it will not go away.

Today, networks where investors small and large can discuss companies, evaluate proposals, and band together for change exist all over the web. Stocktwits.com, affluence.org, wikinvest.com, and many others have very active users who share information and opinions about the companies they invest in, and it's not always good news for companies. StockTwits and Wikinvest are aggregating data and building a robust network of traders who are anything but short on opinions.

So what's a company to do? Step one is monitoring the information being disseminated across social media networks. It is paramount for a publicly traded company to keep an eye on what the public is saying in order to track corporate reputation on the web. Misinformation must be addressed publicly immediately, or the news will likely be received by the masses as fact. Once the proper monitoring strategy is in place, a company can begin to engage with consumers and investors.

The use of Facebook Groups and Twitter profiles is a no brainer for an IR department. Real time release of public information should occur from the horse's mouth, not an activist investor with a bone to pick. Once a company has shared information via social media, it can engage followers for feedback to better understand sentiment and prepare dress for the office problematic issues before they spiral out of control into proxy battles. The speed at which information travels over the web can cause spikes and dips in a company's valuation, so controlling what spreads and monitoring the response are key for investor relations professionals.

It has been said that people will deny change until it is apparent. It was only a few years ago when people didn't want to text message or have a Facebook profile; now texting and Facebook are apparent, and you'll be hard pressed to find someone denying them. The same is the case with investor relations and social media. Although it can be a daunting and frightening task to bring a company's IR efforts onto Twitter, Facebook, and the like, there's simply no more denying the need. A company who refuses to accept what has become apparent risks serious trouble.