SEC opens the barnyard door on social media

April 4, 2013

As you’ve probably heard by now, on Tuesday afternoon the SEC said that companies (and the CEOs who run them) can happily tweet and post to Facebook and other social media sites to their hearts’ content.

Prompted in  large part by a boastful posting on Facebook last July by Netflix CEO Reed Hastings, the SEC ruling (here’s the press release and the meatier Report of Investigation) says that as long as companies notify investors in advance, it’s perfectly OK to release news electronically. In one sense, this isn’t much different than companies posting information on their websites. But the immediacy of twitter, in particular, and the fact that there’s already folks out there mining tweets for sentiment analysis means that the stakes are much higher.

Why? Because it’s hard to imagine a scenario where a company (or its CEO) posts news items that could potentially impact the company’s stock price without an attorney reviewing that item – very carefully — beforehand. Anyone who’s ever been involved in issuing a press release (and particularly an earnings release) knows that they aren’t just whipped up and squeezed out in the amount of time it takes to tap out 140 characters.

Within hours of the SEC’s decision, Delta Air Lines included information about its twitter feed and Facebook pages at the bottom of a routine press release on its March traffic, something that it didn’t do before. On Wednesday morning, AutoNation  CEO Mike Jackson jumped in whole-hog, posting 5 tweets that contained details about various aspects of the business related to March sales figures, which the company released on Wednesday. While Jackson’s twitter feed isn’t new, the subject matter changed markedly literally overnight from basketball to auto sales. And, for the first time since Jan. 2011, AutoNation included a link to Jackson’s twitter feed in its press release. Marc Cannon, a spokesman for the company, told me that the company reviewed the SEC’s ruling and it was “crystal clear. So we talked to our General Counsel and quickly crafted a policy. Why wait?”

It will be interesting to see how other companies handle this. My guess, knowing how lawyers work, is that it will take a bit longer for most companies to respond and those that do will probably be pretty cautious. There’s also a question about what this means for older people. My uncle, for example, barely knows what twitter is. But he owns individual stocks. Will he need to learn how to monitor twitter feeds for those companies now?

So even though I’m a big fan of twitter and hardly a day goes by where I’m not on there (if you’re not already following @footnoted, please start), I think this will be very interesting to watch. We’ll be looking for more tweeting CEOs in the filings. Stay tuned!

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