Social Media Reshape Financial Communications

Social media’s disruptive approach to communications will be interesting to follow as it relates to financial communications and investor relations. While social media offer new ways of reaching investors, they also entail a certain amount of risk for publicly-traded companies with respect to fair disclosures and legal compliance.

Wouldn’t it be absurd for a company to have to tweet CYA legal disclosures when Twitter only allows for communication in spurts of 140 characters? Well, that’s exactly what eBay will be doing next time it tweets earnings information to avoid getting into trouble.

Companies also run the risk that someone communicating through social media might affect the company's stock price by focusing only on positive information or jumping ahead during earnings calls.

According to a recent Financial Times article, next time eBay tweets information during an earnings call, it will first send four legal disclosure tweets, including one to the effect of: "The presentation of this financial information is not intended to be considered in isolation or as a substitute for GAAP financial measures."

While there will be growing pains, and even though the SEC will certainly keep a close eye on developments in financial communication, there is little doubt that companies will continue to tweet their way to communicating with new audiences. And social media are just what will allow them to do that.

Are you aware of any companies running into fair disclosure trouble from social media? I’d love to hear about it.

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