Yesterday, the SEC said that posting on sites such as Facebook and Twitter is just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.
What are the practical implications of this ruling?
- This does not make wire services obsolete, at least not for the time being. Investors are too conditioned to using various portals to follow the news of their companies. They also use these portals to pull up historical news. Wire services such as Businesswire, PR Newswire and Marketwire are an efficient method to ensure that all of the portals — Yahoo Finance, Bloomberg, Google, Marketwatch, etc. — receive news and archive it in the portals’ historical news feed. Unquestionably there is behavioral change afoot as to how investors receive news, but until we get more certainty that investors are comfortable with new avenues for material disclosures, we recommend that you continue to distribute material news via a wire service.
- A public company cannot begin using a form of social media, such as Twitter or Facebook, as their primary forum for announcing material announcements until they have first advised investors of this change. Most likely, this would be in the form of a traditional press release across the wire announcing the change, but we are getting more clarity on this.
- As we all know, after a news release is made public it should always quickly be posted on the corporate website and, if appropriate, distributed via various social media channels such as Twitter, Facebook and LinkedIn. Keep in mind that this ruling by the SEC only pertains to material announcements. Non material trade announcements can be distributed via these channels at any time. The grey area here is the issue of “materiality.” One metric is whether a piece of news, on a standalone basis, could move the stock. It is always best to be conservative when evaluating materiality.
- It is important to note that while Twitter, Facebook and LinkedIn are not core channels for material investor information, they are increasingly important for a company’s broader corporate communications effort.
To read the full article from the Wall Street Journal, click here.