Marketing and corporate communications departments at public companies have for years embraced social media to drive engagement across a broad range of constituencies. However, investor relations, because of historic concerns about legal constraints related to disclosure, has been a relative latecomer to the party.
After all, most analysts and institutional investors have also been slow to climb onto the social media bandwagon. Investors typically rank social media sources as very low in trust and most would never make investment decisions based on information they learn via social media without validating it elsewhere. However, the investment community has finally begun to use social platforms to gain investing insights. Many join online groups to observe discussions; they monitor what social media sites are saying about companies, executives or industries; and they closely monitor financial news websites, whose stories and social posts can rapidly affect company share prices.
So, accepting the premise that social media is increasingly important for IR, what are its most common applications? At a very basic level, companies are using social media as a highly effective tool for monitoring real-time changes in investor sentiment, and a quick-fire response mechanism to correct misperceptions or respond to inquiries.
However, beyond simply listening and occasionally responding, some companies are now using social media in more strategic ways. Social media can serve as a billboard to showcase basic company news such as pending earnings calls, the availability of an annual report or management’s participation in an upcoming industry conference. Even more importantly, social media can effectively communicate material company information about new product announcements, executive leadership changes, stock splits, mergers, spinoffs, etc.
Social media can be used to both amplify traditional disclosure, and build interest in a company’s unique story and value proposition. It has enabled more and more companies to abandon traditional wire service distribution outlets as their sole mechanism for releasing material news.
Even more robust applications for social media have begun to emerge, such as live tweeting of earnings calls or taking life questions submitted via Twitter or Facebook during the call. More companies are adding live video chats following the earnings call to enable their CFO to offer additional context about the company’s performance.
Social media has also become a central communications channel for risk management and crisis communications planning. Many would agree that the real power of social media for IR manifests within the context of a crisis or a proxy battle, when timeliness of communications is critical.
For example, let’s say the Twittersphere lights up with rumors that your company’s CEO is experiencing serious health problems—to the point where your volume and share price are affected. Social media can be a useful tool to correct these types of inaccuracies quickly, mitigate the impact or otherwise provide clarity on a situation whose reality may not be nearly as dire as the social media chatter may imply.
One common tactic in a crisis is to share communications with employees via social media as a means of disclosure. Nine times out of 10, if a C-level leader sends a mass email to employees, it won’t be long before a journalist or blogger gets hold of it. To prevent this risk, companies often post these communications on their social platforms with a preface that essentially states: “This is the note that we sent to all employees today regarding the status of our CEO’s health.”
The best IR departments also make sure that what’s happening in social media across the enterprise is closely aligned, timing announcements such as new products or markets to coincide with investor events like roadshows, investor conferences, earnings calls, etc.
The fact is that social media is just one tool in the IR and communications arsenal, which combined with traditional press releases, investor meetings, conferences, webinars, podcasts and regular conversations can ensure that the investment community has adequate access to both public and non-public data; material and non-material sources; to make an informed decision about whether to buy or hold your company’s shares.
Companies and their IROS who embrace social media and its unique communications attributes stand to reap an important strategic advantage over their less engaged peers.