Don’t think about Social Media for Investor Relations
By Abe Wischnia
President
Abe Wischnia & Associates
An earlier version of this article was originally published in IR Alert, July 12, 2010 under the title:
Afraid of IR 2.0? Then Don't Even Think about Social Media forInvestor Relations
Using social media for investor relations continues to be a popular topic of discussion, at least based on attendance at sessions focused on it at the recently-concluded NIRI conference. People are thinking about it more and a very small number of companies are actually doing it. But based on my conversations with IROs at the conference, most are, in a sense, paralyzed with fear.
The term “social media” is too loaded, problematic and scary for IROs. Since it carries all sorts of regulatory implications, they’re afraid of possible disclosure problems. They’re afraid of trying to convince a securities attorney who would never use Facebook or Twitter that they are OK for investor communications. They’re also afraid of how much time it will take to implement and manage a social media IR program.
So I say, don’t think about social media for your IR plan. Instead, think about using web-based tools to better engage directly with investors. Change the terminology and you’ll see that we’re really talking about tools to make you more effective in the way you communicate with the investment community.
Don’t think about social media – think, for example, about adding an “ask management” page to your existing IR website. It would let investors submit their questions online and let you post the questions and answers on your IR website for all to see. That may sound scary, but the questions they type are the same ones they would ask you on the phone. The answers you post are the same answers you would give on the phone. And the vast majority of the questions and answers will likely be in the internal Q&A you already maintain. The real difference, and I know this from experience, is that it will save you all of those hours that you spend on the phone answering the same questions over and over.
And, instead of a stagnant FAQ page that you have to remember to update, you’ll have a growing Q&A list driven by what your investors really want to know. I’ve seen shareholders copy the questions and answers from a company’s “ask management” page and submit them as their postings on third-party stock message boards – spreading the company’s message even further. That’s an added benefit.
You can also use the “ask management” page to solicit investor questions in advance of a conference call. That you’ll know know ahead of time what they want to hear addressed.
Don’t think about social media – think about adding a CEO’s blog. Think of the CEO’s blog as a form of a news release that uses more conversational language. A blog, appearing once monthly, would allow your CEO to provide additional detail and color about the company’s business and announcements as disclosed in news releases. The blog can also address the shareholder concerns that show up in questions submitted to the “ask management” page. The CEO can communicate in a less formal, more personal and more conversational way than in a news release. Just make sure the blog text gets the same review and vetting that you use for a news release and file an 8K.
Don’t think about social media – think about adding a Twitter feed to further disseminate disclosures you’ve already made in a news release or filing. The Tweet can include a hyperlink to your previous disclosure. It’s easy to do, very low cost, and no Reg. FD issues since you’re just alerting investors to an existing disclosure. A recent paper by the Ross School of Business at the University of Michigan says there is a correlation between company Tweets around news events and tighter bid/ask spreads in the company’s shares. (Read the full paper here: http://tinyurl.com/2ahvrgd)
The communication tools I’ve mentioned are just a few examples of ways to add web-based direct communications to better engage your investors. You can apply them at a pace that fits your comfort level, allowing you to test one before adding another.
A growing percentage of your investors are already using social media in their daily lives. They’re coming to expect interactive communications and engagement from the companies they do business with and that expectation will increasingly apply to companies they invest in. This development will change the way effective IR is practiced. It means you will have to rethink the relations part of IR.
Companies have to become more proactive and interactive in dealing with their constituents. The marketing and PR people in your company probably already understand this. Investors will be expecting this on the IR side also.
Whether you’re trying to sell a product or an investment thesis, it’s no longer good enough to just keep putting out press releases and hoping for pick-up. You can no longer rely on traditional media to get your messages to your audience. In the public relations field, they’re referring to this new understanding and use of the interactive web to engage constituents as PR 2.0. You need to be thinking about IR 2.0 and, more importantly, putting it to work.
