THERE are many reasons why investor relations officers and company executives avoid participating in new media such as blogs and social networks, but often the grounds they give are more misconceptions than real barriers.
Take Regulation FD, for example. In my discussions with companies and other consultants, it’s the main reason given for companies taking a pass on the opportunities available to them to connect with a huge audience of investment professionals and sophisticated individual investors on Seeking Alpha.
But concerns about IROs and company executives selectively disclosing material non-public information on Seeking Alpha are unfounded for two main reasons:
1. You have time to think and review before posting.
No one is pressuring you to post an article or respond to a question on Seeking Alpha. You have ample time to carefully consider what you are posting and even have someone review it before it goes live.
In this sense, participating on Seeking Alpha is much less risky than the common IR practice of meeting pushy professional investors in private. Any executive or IRO who worries about selectively disclosing information on a web service like Seeking Alpha probably should never meet with investors in private one-on-ones because they’re obviously not competent enough to do so.
Additionally, Seeking Alpha users aren’t looking for material non-public information. They’re looking for investment ideas and background information that can help them understand your business and its future potential. While you could use the site to distribute breaking news, that’s generally not why investors use Seeking Alpha.
2. Posts on Seeking Alpha are public.
Even if executives inadvertently provide material non-public information on Seeking Alpha, it’s hard to argue that posts on Seeking Alpha are non-public. Not only are postings on the service exposed to a potential verified audience of up to 3 million investors, Seeking Alpha also uses technology that can distribute the information simultaneously and in near real-time to multiple locations on the web, including to the company’s own website.
In fact, this technology is faster and more open than the PR newswire services that IR departments current rely upon to distribute their material news.
It is getting to the point now that any post or message on the public web can reach any interested investor within seconds of it being made. A post on Seeking Alpha or a myriad of other locations on the web is no longer a proverbial tree falling in the forest. This is because of new technologies that have emerged over the past year, including real-time syndication and search technologies.
When the U.S. Securities and Exchange Commission issued guidance in August 2008 saying that posts on the web can meet the requirements of Reg. FD, these real-time technologies either did not exist or were not widely deployed. Besides, the SEC determined that it was not necessary to use push technology for a website posting to be deemed public. Fast forward to today, and it’s hard to argue that any post that uses real-time syndication technologies and is indexed by real-time search can ever be considered non-public.
The lynchpin in Seeking Alpha’s real-time syndication system is Twitter, the popular microblogging service that in turn can be linked to a variety of other services on the web. By setting up a Twitter account and linking it to your Seeking Alpha account, real-time alerts can be spread automatically across the web to notify investors that a company executive has added content to Seeking Alpha. This can be set up by default so that all your activity on Seeking Alpha is automatically sent to Twitter in the form of a headline and a link to the Seeking Alpha content.
It’s important to understand that notices sent to Twitter do not need to stay on Twitter. You can automatically post your Seeking Alpha notices via Twitter to your corporate website using a variety of free widgets that are simple to embed on your IR homepage. And from your own site, you can include the notices in web feed and email alerts to your subscribers.
You can also send your Twitter messages to other web pages you control, including a Facebook page. And with a little careful writing of your headlines, you can also ensure that your posts will be indexed by services like StockTwits, which tracks real-time conversations around stocks and other securities. All you have to do is follow @stocktwits from your Twitter account and include a $ symbol in front of your company’s ticker in all of your Seeking Alpha headlines and they will instantly appear in the streams of investors who are interested in your company, and potentially even on their Bloomberg terminals.
In essence, with the technologies available today, every executive and IRO can have a personal newswire that connects them to interested investors in real-time anywhere in the world and on any Internet-connected device. Anyone can set this up, and it doesn’t cost a penny.
Indeed, I foresee a time in the near future when legal counsel will consider it reckless for executives not to have such a personal syndication system in place.
Getting off the old IR treadmill
Most IR departments are caught on a treadmill of tired practices that are becoming increasingly ineffective. IROs don’t use the web because the phones keep ringing, and the phones keep ringing because IROs don’t use the web.
But the fact is, participating in social media requires less time, less resources, involves less selective disclosure risk, and can deliver better ROI for each dollar spent than traditional IR activities, which typically reach fewer investors, come with hefty costs per investor reached, and require a lot more of the executive teams’ time in terms of preparation, travel and meetings, not to mention heightened selective disclosure risks.
Meanwhile, various surveys have recently found that investment professionals are increasingly turning to blogs and social media as a source of new ideas. A September 2009 survey of almost 500 investment professionals conducted by Brunswick Group, the international financial communications firm, found that 20% of the respondents reported having invested in a company they first learned about via a blog. And fully 58% of respondents in the U.S. and Europe said they believe new media will become increasingly important to the investment process in the future.
If ever there was a time for IR departments and company executives to start using social media, it is now. And as I survey all of the options available to companies to enter this arena, Seeking Alpha stands out for me as the single best place to start. It has an audience most IR departments will be comfortable engaging with, and the management team there is committed to helping IROs and company executives find their way on to the social web, just has they have done for financial professionals.
This is the last post in my 3-part series on Seeking Alpha. See Part 1 For Investor Relations, Seeking Alpha may be the ideal social network and Part 2 How to get started on Seeking Alpha
As always, if you have any questions, feel free to contact us via email. And if you have any comments about the series, leave them in the comments below.