OVER the past several weeks, dozens of companies have added a new feature to their normally mundane quarterly financial reporting ritual: they are using social networks to deliver a stream of updates and key facts from their results announcements in so-called “live tweeting” sessions.
So far during the second-quarter reporting season, more than 50 companies have used networks like Twitter and StockTwits (sponsor) to live tweet their earnings announcements, analyst conference calls and to direct investors to additional information as it becomes available. We define live tweeting as companies sharing more than just links to their earnings releases and conference call webcasts, which several hundred companies are now doing.
While there is some debate about whether all live tweeting adds value to investors and other stakeholders, it seems clear the practice is destined to become more common in future earnings periods.
Prominent US companies doing it
In the current reporting season, things kicked off July 11 with aluminum giant Alcoa Inc. (NYSE:AA), whose results traditionally mark the start of the US earnings season, live tweeting the company’s earnings using a verified account on StockTwits. During that session, the company distributed 24 messages on StockTwits highlighting key information from its earnings release and analyst conference call, as well as directing investors to additional material on Alcoa’s website.
Other well-known U.S. companies that have live tweeted their earnings announcements include PepsiCo, Inc. (NYSE: PEP), The Coca-Cola Company (NYSE:KO), The Boeing Company (NYSE:BA) and eBay Inc. (NASDAQ: EBAY), whose Senior Manager of Social Media Richard Brewer-Hay was the first to live-tweet an earnings call 3 years ago with his company’s Q2 2008 earnings announcement.
In a bold move for a recently listed company, LinkedIn Corp. (NYSE: LNKD) chose to live tweet its first-ever earnings call in a process the company’s Senior Social Media Manager Mario Sundar explains in this blog post. LinkedIn is among the first companies to also use a new service from StockTwits and Cmp.ly that attaches disclaimers to messages via a link.
International companies see good traction
But live tweeting earnings information is not limited to only US companies. About half of the live tweeters are non-US companies and some of the best examples come from Europe, Asia and emerging markets.
Social networks are particularly beneficial to the hundreds of international companies which have sponsored Level 1 America Depositary Receipts (ADRs), but which have historically had few channels through which to reach US investors. By using social networks, however, these companies can at once increase the visibility of their thinly traded ADRs while also establishing two-way channels of communication with interested investors.
A good example is BASF SE (PINK: BASFY), a constituent of Germany’s blue-chip DAX index that also has a less visible ADR program. BASF’s ADR is not well known due in part to the fact that information about the company is seldom if ever available on major US investment websites and other services – even if the company pays a US-based PR wire service to distribute its information.
However, by using StockTwits and its distribution to websites such as Reuters.com and Yahoo! Finance, BASF is now able to disseminate its information to investors on these websites at very low cost. This gives US investors convenient access to information about Level 1 ADR companies and could potentially help to improve liquidity in many of these ADRs.
IR Web Report’s analysis of social media activities by non-US companies has found that there is growing interest in these companies from US-based social network users. For instance, a year ago only 6% of the clicks from social networks to BASF’s earnings call webcast came from US-based users, but in the most recent quarter that number has jumped to 28%.
Other examples of international companies that have live tweeted their earnings announcements in recent quarters include Roche Holding Ltd. (Switzerland), Allianz SE (Germany), Telstra Corporation (Australia), Standard Bank Group (South Africa), and Tech Mahindra (India).
But does it add value?
Two main approaches to live tweeting earnings information have emerged. US companies tend to favor pushing out messages from their earnings releases and earnings calls, while non-US companies do the same but are more inclined to tweet links to third-party coverage of their results announcements.
The jury is still out on the usefulness of companies live tweeting earnings releases and conference calls. We have seen both positive and negative comments from investors about companies that live tweet earnings calls. Some praise the practice while others complain that companies are pushing out too many low-value messages – typically at a rate of 2 messages per minute.
Our view is that live tweeting scripted earnings call remarks adds little value since the information typically is already provided in the earnings release, which often precedes the earnings call by an hour or more. None of the live tweeters is distributing information from their earnings call Q&A sessions, which are the most valuable parts of these calls as they often elicit new information.
It may be better for companies to tweet highlights from their earnings releases but play down the scripted remarks on their earnings calls, either by tweeting only new information not contained in the release or by setting up separate Twitter accounts for those who want to receive the tweets rather than listen to the webcast.
StockTwits offers perhaps the best solution because each company has two message streams: one for messages containing the company’s ticker symbol and one for all company messages. By excluding their ticker symbols from duplicative earnings call messages, companies can still deliver the information to those who want it while avoiding unnecessary duplication in their “ticker streams.”
Content of messages key
While the volume of messages during live tweeting sessions has the potential to make companies seem overbearing and promotional, the content and tone of the messages is a more important factor for companies to consider.
Messages should add value to the recipient by imparting new and relevant facts rather than pushing out PR messages or distributing information from earnings call scripts that is already contained in the preceding earnings release. Taken as a whole, the messages should provide a balanced picture of the company’s results.
Companies also must be cognizant of the disclaimer requirements for certain types of information in their messages and take steps to ensure that these messages are accompanied by appropriate cautionary language even when viewed in isolation from other messages, as LinkedIn did in the above example. Forward-looking information and non-GAAP measures are key areas companies should be concerned with.
Finally, companies must be prepared to respond to users who react to their messages on social networks. While history has shown that investors seldom ask questions via social networks, companies must be prepared to respond quickly when they do , even if to say that they will follow up later. There is nothing worse than a company that sends out a barrage of messages to its followers but then fails to respond to feedback or questions from the audience.
Live tweeting around earnings announcements has the ability to improve visibility for companies in the market, give investors real-time access to new, high-value information and open up new channels of two-way communication.
However, like any new practice companies should focus on adding value to their audience and be willing to adjust their practices when they miss the mark.