How Social Media Benefits Investor Relations

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According to Merriam-Webster, social media are forms of electronic communication (such as websites for social networking and microblogging) through which users create online communities to share  information, ideas, personal messages, and other content. Based on research conducted by Hootsuite, there were 3.03 billion active social media users as of October 2017. With such a vast amount of active social media users, corporate investor relations departments should fully embrace social media as free communication tools.

It may take time for social media users to think of these platforms as more than a way to view family vacation photos and videos of cats, but using social media will become an important communications tool for investor relations professionals. While the technology used to access social media may change in the future, social media via the internet is here to stay.

Here are our top three strategic reasons why corporations should embrace social media for investor relations.

    1. Fair Disclosure. In 2013, the Securities and Exchange Commission (SEC) issued a report stating companies can use social media outlets to announce important information in compliance with Regulation Fair Disclosure (Regulation FD). They can do this so long as investors are aware of which social media will be used to disseminate such information. These findings extend a 2008 report, which clarified that companies could use websites to disseminate information to investors, as long as investors were aware to look there.

      Corporate investor relations departments would be prudent to utilize social media platforms to communicate key information with current and potential investors, as this makes information available to everyone at the same time. If a corporation publishes a press release via a newswire service, we suggest that it simultaneously uploads the press release on its website and posts the headline on social media. By applying this practice, information will be distributed to more people at once.

    2. Tremendous Reach. As of October 2017, researchers estimated over 3 billion active social media users, and over two-thirds of those users were on Facebook. Posting a press release on a company’s Facebook or LinkedIn page, or simply tweeting a headline with a link to its webpage, allows a company to reach exponentially more potential and current investors than they would by only posting a release on its website or publishing a press release through a newswire agency.
    3. Push vs. Pull Marketing. When a company has key information or news to release, it will typically publish a press release via a newswire agency and upload the press release to its website. Depending on which news service an interested investor utilizes, he or she may not notice the recently-published press release. Furthermore, even though most paid news services (e.g., Bloomberg and FactSet) will immediately post the press release headline, it may take hours for free services like Google or Yahoo to pick up the headline. In order to avoid this problem, companies can push out corporate news to social media followers. This will instantly push the information to more people, notifying them of a new press release.

The concept of social media has been around for years, but new technologies and services have been developed to enhance the delivery of information, ideas, personal messages, and other content. The adoption of social media as an investor relations tool has been relatively slow, due to the prevalence of news aggregation services like Bloomberg and FactSet.

Corporate investor relations professionals should utilize social media technologies to not only deliver key information and news to its institutional investors, but to deliver timely information to current and potential investors who do not subscribe to financial data aggregation services.

Greg Chodaczek, Managing Director

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