Social Media’s Big Impact on Investor Relations

by coach on September 13, 2010

New York Stock Exchange

Social media impacts investor relations

Social media is impacting investor relations practices in a big way.  The trend to using social media to reach shareholders, analysts, media and investors is relentless, forever changing how IR and PR managers do their jobs.

Some companies are abandoning or limiting use of newswires to deliver financial results. It’s partly cost-driven but also because some social media channels like Twitter are proving very effective in delivering results.

An October 2009, Q4 Blog post Trends and Best Practices in Online Communications and Social Media in Corporate IR reported that while corporations were slow to implement social media some leaders like Dell, eBay, CGI and J&J were using Twitter and exploring MySpace, Facebook and blogging.  In just 12 months following, there has been a surge in adoption helped along no doubt by new SEC and NYSE guidelines.

Dominic Jones’ August 17, 2010 IR Web Report notes “More than four in ten of the most actively traded US-listed international companies – including well-known firms like Alcatel-Lucent, Vodafone, Barclays and Petrobras – are not using paid PR wires to distribute their earnings releases and other disclosure information.”

Jones cites large companies like HP, CME Group and Ford which have adopted StockTwits as an official IR channel. Another recent post highlights 10 great examples of more than 150 other corporations using Twitter though he’s not convinced about using Twitter to stream earnings calls.

So, does social media impact share value? Laurance Buchanan looked at whether recent social media campaigns affected the value of United Airlines, British Telecom, Marks & Spencer and Nestle. While there were short term negative impacts, results are inconclusive.

What is clear is that activists can stir up a powerful firestorm with the potential to impact share prices depending on company response. Just another reason for PR and IR pros to have crisis plans at the ready.

One of the most intriguing prospects is whether social media can influence liquidity. A recent research report highlighted by the Sept 2, 2010 issue of IR Web Report says definitely yes.

Editor Dominic Jones writes “The Ross School of Business at the University of Michigan recently published a study with a rather startling finding — using social media like Twitter can help companies overcome a lack of media and sell-side analyst coverage and improve liquidity for their stock.”

In an interview, researcher Hal White said, “managers in firms that aren’t getting a lot of attention from the press can use new information technologies that allow direct access to investors, or direct-access information technologies (DAITs), to get information to investors, which results in lower information asymmetry and therefore better liquidity for the firm.”

This points to interesting times ahead for public companies.

Even financial advisors are jumping on the IR-social media bandwagon. Q4 Blog notes a study by Socialware showing 60% of financial advisors in North America are now using social networks to drive new business.

Like so many communication functions, investor relations is also being dramatically impacted by social media. The good news for investors is access to more, and more timely,  information. The bad news is IR and PR pros will have to stay ahead of new developments, maintain extensive social media monitoring and, most difficult of all, convince senior management to jump into the brave new world of IR social media.

What’s your experience using social media for investor relations? Any IR predictions for the future? Comments welcome below.

Check out the handy list of investor relations and IR social media tips following. And you’ll find there are lots of additional Investor Relation Resources in the PR Library too.

Photo credit: Mister V

Investor Relations Tips

5 free stock chart options for IR websites [IR Web Report]
41% of heavily traded US-listed international firms shun PR wires
[IR Web Report]
Best Practices for Organizing an Investor Day [Q4 Blog]
CEO’s online video mea culpa boosts investment – study [IR Web Report]
Does SlideShare Pro make sense for investor relations? [IR Web Report]
Give Your Investors Non-required Information [Corporate Eye]
How to fix the 80-second disclosure gap [IR Web Report]
Let Investors See What You’ve Been Talking About [Corporate Eye]
MarkThisDate: A great tool for IR website calendar [IR Web Report]
What Makes for Effective Investor Relations Sites? Part 23: More on Strategy [Corporate Eye]
What Makes for Effective Investor Relations Sites? Part 22: Tell Investors When They Can Expect Things [Corporate Eye]

IR Social Media Tips

5 lists IR Twitter accounts should have [IR Web Report]
60% of Financial Advisors in North America Using Social Networks to Drive New Business: Study
[Q4 Blog]
Accounting professors find social media improves stock liquidity: interview [IR Web Report]
Australian IR pros see social media’s influence rising
[IR Web Report]
HP, CME Group, Ford adopt StockTwits as an official IR channel [IR Web Report]
Introducing StockTwits IR Beta [StockTwits]
Investor relations on Twitter: 10 great examples [IR Web Report]
IR Can’t Ignore Social Media: Four Steps and 20 Tools to Get You Started (and Keep You Compliant)
[IR Alert]
Lies, lies and dammed statistics – do social media storms really affect a stock price? [Customer Think]
Public Company Use of Social Media for Investor Relations – Summer 2010 [Q4 White Paper]
Reporting Earnings, HP Style [IR Web Report]
Trends and Best Practices in Online Communications and Social Media in Corporate IR [Q4 Blog]

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