ALAN Meckler, CEO of WebMediaBrands Inc. (NASDAQ: WEBM), may be single-handedly redefining how corporate executives in the buttoned-down world of public companies communicate with their investors.
The 64-year-old media entrepreneur, whose company owns interests in a number of online businesses and blogs, has been using Twitter to talk about his micro-cap company in ways that have stunned some observers and even drawn questions from the US Securities and Exchange Commission (SEC).
While some in the conservative world of corporate disclosure have speculated about how Twitter might meet the SEC’s Reg FD requirements, Meckler appears to have made up his mind that Twitter is as good a channel as any to break news about everything from pending acquisitions to his next quarter’s results.
The result is that investors in WEBM are being treated to a new level of access to their chief executive and board chairman, as well as unprecedented commentary and news about the company’s business in a real-time, abbreviated format that was previously unheard of.
Previewing company’s results
Although the company has in the past argued that Meckler’s tweets are innocuous and do not stray into the realm of material, non-public information, his recent messages leave little doubt that he is challenging conventional practice.
At 10:55am on July 13, almost a month before WEBM’s scheduled second-quarter results release, and without any prior disclosure of the results, the CEO tweeted a message about the upcoming results that included an announcement that “WEBM had a strong quarter.”
Three weeks later, on Aug. 3 at 4:13pm ET, Meckler again mentioned that his company’s upcoming Q2 results were strong by saying: “WebMediaBrands posts its 2nd Qtr financials a week from today after market. Conf. call is on Thursday at 11am eastern. Rev. growth big.”
When the company eventually released its results on Aug. 10, it reported second-quarter revenue growth of 55% compared to the same quarter in the prior year.
Meckler is also comfortable tweeting about upcoming acquisitions and even his personal purchases of WEBM’s stock – before the information is reported to the SEC.
At 1:17pm ET on Nov 10 last year, Meckler announced on Twitter that he had bought 400,000 shares of his company’s stock in the open market. Information about the purchase was filed with the SEC two days later.
If nothing else, the fact that Meckler’s brazen communications on Twitter have occurred without investor complaints or disruption to the company’s stock trading suggests that the market is more than comfortable with executives using Twitter to disclose material information.
SEC questions company
But some observers have been taken aback by Meckler’s unconventional approach to disclosure.
Last December, for instance, the SEC’s Division of Corporation Finance questioned the company about the CEO’s tweets, which at that time were being posted on a blog linked to the company’s website.
Said the SEC’s letter: “We note a link to Mr. Meckler’s blog on your website where Mr. Meckler has provided updates on future acquisitions, stock option purchases and new services. Please explain to us whether these updates conveyed information in compliance with Regulation FD and other Commission rules and regulations.”
For guidance in formulating its response, the SEC referred the company to the commission’s 2008 interpretative guidance on the use of company websites, which explains when and how postings on the web can meet Reg FD’s requirements.
Company cites Twitter’s push nature and CEO’s followers
In the company’s response to the SEC, attorney Don Reynolds of Raleigh, NC-based Wyrick Robbins argued that Reg FD was not implicated because none of Meckler’s tweets concerned material, non-public information.
However, while the company considered the issue moot since Reg FD was not at issue, Reynolds suggested that the CEO’s tweets “might qualify as ‘public disclosures’ under Regulation FD” and the SEC’s interpretive guidance.
Reynolds said that the tweets could be seen as meeting the two main requirements of the SEC’s guidance: 1) that the site is a recognized channel of distribution; and 2) postings on the site disseminate the information in a manner making it available to the securities marketplace in general.
As an Internet company, wrote Reynolds, WEBM’s “website is the most obvious and recognized source and channel of distribution of company information. The site is widely known and visited by people who follow the Company. In addition, the Form 10-K includes disclosure of the Company’s website and indicates that the Company’s SEC filings and other information about the Company is available on that site.”
On the second requirement, Reynolds said that access to Meckler’s tweets was clearly displayed and readily accessible on the company’s website and his tweets were widely distributed.
“Currently, over 2,000 people follow Mr. Meckler’s posts (in December 2010), meaning that they receive Twitter notifications whenever he posts additional information. This is what the SEC refers to as “push” technology in the Release,” wrote Reynolds.
Ten days later, the SEC wrote back to the company in a letter addressed to the CEO which said simply: “We have completed our review of your filing and do not have any further comments at this time.”
Democratizing access to most-informed sources of information
Since then, Meckler has continued to use Twitter and has seemingly become freer with the information he shares. Rather than link to a blog that lists his tweets, there is now a link to his Twitter account positioned prominently at the top of every page of the company’s website. His followers have since grown to more than 2,500, which is far more than the 430-odd following the company’s corporate Twitter account.
In light of his recent tweets about upcoming financial results, I emailed attorney Reynolds at Wyrick Robbins this week to ask if the company now considers Meckler’s tweets to be compliant with Reg FD. He responded that they have “not taken a formal position one way or the other on this point” and declined to comment further.
I applaud Meckler’s use of Twitter to communicate with investors. In an era where institutional investors spend billions annually to glean important information through private access to company executives, Twitter and other new media channels democratize access for all and can help to rebuild public confidence in company executives and the capital markets.
Rather than discouraging executives from using new media, regulators should be encouraging them to make a more concerted effort to use these new channels. Social media are both technologically superior to current disclosure systems and provide greater transparency into the personalities and perspectives of executives.
The SEC’s 2008 guidance provides a workable framework for companies to do this, but regulators in the US and elsewhere need to be bolder in encouraging practical implementation.
Meckler’s tweets may seem highly unconventional and certainly challenge prevailing approaches to disclosure laws, but since when was it a bad thing for all investors to have real-time, public access to information from the most-informed sources of information about public companies — their CEOs?