Despite the U.S. Securities and Exchange Commission (SEC) giving a green light to disclosure via social media, the vast majority of investor relations (IR) departments are neither using social media today nor do they have any intention of doing so any time soon.
That’s the headline finding from a survey by Corbin Perception for the National Investor Relations Institute (NIRI) conducted a month after the SEC said social media could be used to comply with Regulation Fair Disclosure.
The survey found that 72% of surveyed IR professionals don’t currently use social media for IR and less than half of them will consider doing so in the next 12 months.
When asked why they aren’t tweeting, blogging or posting on Facebook, investor relations professionals surveyed said it was “primarily due to lack of interest by the investment community.”
However, the researchers got a somewhat different message when they asked institutional investors about their social media use.
Of 87 buy-side institutional investors surveyed, 52% said they use social media as part of their research process — and 43% say they will likely use social media more in the future.
The survey results point to an apparent disconnect between investor relations departments and the investors they are meant to serve, but the reality is probably more nuanced than that.
When investors have to ask, it will be too late
The fact is institutional investors are incorporating social media sources into their research processes because they have to for due diligence purposes. In some cases, especially where company executives are using social media to communicate publicly, investors would be negligent if they did not monitor what was being said.
However, that doesn’t mean institutional investors and analysts like having to monitor CEO tweets or Facebook posts or that they believe social media adds value to their research. Indeed, the survey found that 92% consider the information gleaned from social media sites as either somewhat or not at all reliable.
For institutional investors and analysts, social media makes their jobs more difficult by increasing the number of disclosure channels they need to monitor to avoid being caught unawares by new information. It increases the complexity and tension in an already stressful job.
So, yes, investor relations professionals aren’t lying when they say they’re not getting calls from institutional investors asking them why their CEOs aren’t tweeting. Those calls aren’t going to happen – at least not yet.
That said, it would be unwise for companies to take the results of this survey as a sign they can continue to do nothing. There’s a real risk that investor relations professionals will be left behind as more investors – buy-side, sell-side, institutional or retail – become accustomed to using social media in their work flows.
Companies that are already using social media are gaining valuable experience and knowledge while enjoying the benefits that come from being early adopters, and from more frequent communications with growing numbers of social media savvy investors.
If IROs wait until investors start asking for their Twitter handles, it might be too late to catch up.