If a single tweet can cause a company’s share price to plummet then who is really responsible for social media?
Arguably, not the marketing intern.
Board directors and senior executives need to update any preconceptions they may have about social media being a distraction for kids and get serious about where responsibility for managing it lies.
There’s a risk side but we also need a broader discussion on what communications looks like now.
In July 2014 an Australia activist who tweeted a fake ANZ media release that caused the share price of Whitehaven Coal to fall A$314 million the year before was found guilty of breaching corporations law (s1041E Corporations Act).
As I discuss here there have been numerous cases around the world of the potential misuse of social media but also its positive impacts for business.
Social media is ubiquitous and should be considered a ‘given’ for communication. Almost two billion people use it yet many companies have been slow to translate this shift into business impacts.
Surely the impacts of a channel that is ubiquitous cannot be managed in or by silos and must be wholly integrated into corporate strategy, including governance and risk?
The speed at which online information travels can impact the market quicker than a management team can work out what has triggered the shift.
For example, in 2013 the share price of Whitehaven Coal dropped 6% after a fake press release lit up online networks. The release claimed to be from Australia’s ANZ bank, overturning a recent $1.2 billion loan to Whitehaven Coal that would have had a significant impact on its Maules Creek project.
Both Whitehaven and ANZ later confirmed the hoax, but not before $314 million was wiped off the share price and the company was placed in a trading halt. There were other considerations including that the story was reported by traditional news outlets without source checking back to the Australian Stock Exchange (ASX).
While market rumours are nothing new, social media means information (true or false) can reach people – shareholders, the media, regulators – fast.
- Would you know if there was an online issue that could impact your share price?
- Do you have a strategy for responding?
- Do you own the digital assets (website, Twitter feed, Facebook page and so forth) that would allow you to counter misinformation where it’s happening – online?
These risks can be managed by monitoring social media and implementing a social media strategy including for managing a crisis.
Lest you think Whitehaven was a standalone case, in Australia last year, trading ofMacmahon Holdings was halted when hoax emails prompted takeover speculation, and retailer David Jones was also the subject of a false takeover bid. ASIC suggested social media was responsible for escalating these false market rumours.
But fake press releases are not the only things causing market jitters.
In 2013 in the US stocks plunged temporarily when an announcement about a bomb at the Whitehouse was made via the Associated Press (@AP) Twitter account, which had been hacked.
Action by Twitter (which suspended the account) and AP meant the issue was managed quickly.
But reports suggest over $20 billion worth of stock changed hands during the brief trading hiccup. This raised questions both about the security of Twitter and quality control of algorithmic traders.
The event reinforces the importance of having a strategy that can be activated quickly to minimise damage and restore market confidence.
In some instances, social media is little more than an extension of existing communications practices. Businesses regularly engage with journalists, and with six out of seven financial journalists now using Twitter for work, according to FTI Consulting, this means straddling new and existing platforms.
But in others, with the speed of technology outpacing the law, the tail is at times wagging the dog.
For example in 2012 Netflix (a US company providing on-demand internet media) announced it had exceeded a viewing billion hours to its 250,000 Facebook subscribers, which the Securities and Exchange Commission (the US equivalent of ASIC) interpreted as a violation of Regulation Fair Disclosure.
Netflix argued the announcement was public, given its following included shareholders, key financial bloggers and journalists.
Although there were other factors in the case (the information had already been widely shared and was not relevant to the share price) the event triggered hot debate on what legitimate conversation looks like in the social era.
In April 2013, the SEC announced that social media could be used to make market statements, the focus is still on reaching the broad market and can be read in full here. It’s important to note that disclosure laws vary in Australia, which has an ASX-first approach.
The decision bridges existing and emerging practice, and acknowledges that social media is a legitimate and ongoing channel, without letting companies off the hook with respect to existing obligations. (For those who still think it’s faddish, remember that LinkedIn is 12 years old and Facebook has been around for over a decade.)
There will need to be future conversations about the way in which hyper-connectivity shapes communication in the finance sector (and any industry) more broadly. People are increasingly drawing together small snippets of information from across a wide range of sources.
Continuous disclosure in a social media age
Working closely with the Australian Securities and Investment Commission, in 2013 the ASX updated its guidance on disclosure, advising companies to monitor online for sensitive information to ensure that the market trades fully informed. Further, company secretaries must consider its impacts with respect to risk.
Although precisely what companies need to monitor is open to interpretation, senior social media lawyer Leanne O’Donnell says the guidance strikes a good balance and should not be prescriptive.
Australia’s corporate watchdog the Australian Competition and Consumer Commission (ACCC) is also making businesses aware of legal issues that impact marketing. Jamie White from Pod Legal says the ACCC has taken action against numerous businesses formisleading and deceptive statements about products and services advertised on the internet.
The ASX has been clear that it does not expect companies to monitor every single comment, only for market-sensitive information, material transactions, and market speculation.
And even though identifying where such information may arise or how it might play out is not cut and dried, no crisis is. To this extent, an adaptable and flexible management strategy should overcome any inadequacies on the listening side of the equation. Essentially this extends, rather than overhauls, existing good business practice.
Importantly it elevates social media from its fringe status into one that demands leadership strategy at the highest level, vital for any company that has to compete in a hyper-connected age where the internet economy is set to double by 2016.
Social media monitoring tools
There are many free and paid tools for monitoring social media that can be used by individuals and small business or at the enterprise level (I am not affiliated with any of them). These include tools such as –
- Google alerts (free but time delays).
- Hoot Suite (free and paid versions).
- Social Mention (free).
- Spout Social (paid).
- How Sociable (paid).
- Radian 6 (enterprise).
- Kinship Digital (enterprise).