There’s much talk in investor relations (“IR”) circles about the challenges of social media. But, as discussed in my recent post (Investor Relations 2.0 – Is Seeking Alpha the Answer?), and, as you’ll see below, the opportunities for public companies to engage investors online using social media are real, measurable, and shouldn’t raise any red flags with the SEC.
One of the latest and more popular real-time investor platforms is StockTwits.com (“ST”); think Twitter for investors. On ST, investors share investment ideas 140 characters at a time. The company has cleverly trained stock tweeting investors to include a “$” sign next to every ticker symbol (or public company) they write about. That allows the ST team to seamlessly organize all market related tweets in one place.
At first glance, ST seems like the “Wild West” with ideas coming from all directions. Some of the banter is similar to what one might find on a typical Yahoo! stock message board. But, in fact, ST is a remarkably useful platform for identifying successful short-term traders willing to share ideas either for free or through monthly subscription newsletters.
ST is also a surprisingly useful platform for investor relations officers (“IROs”) and public companies looking to engage investors.
As the ST team freely admits, their community is dominated by short-term oriented, retail investors. These investors focus largely on technical analysis and less on fundamentals in making investment decisions. These are not the types of investors public companies typically pursue. Most public companies prefer investors willing to purchase substantial positions and hold them for long periods of time in the hopes of limiting volatility and attracting other long-term oriented institutional investors.
That said, consider the plight of micro-cap and small-cap public companies. For them, attracting institutional ownership can be a challenge. Institutional investors typically won’t touch smaller public companies until they reach certain milestones such as share price, market cap and/or exchange. By default, these companies rely on retail investors to get them to the point of institutional consideration.
That’s where ST comes in.
ST is dominated by retail investors. Some of them enjoy substantial followings. A growing number are using ST’s various platforms (ST community blogs, StockTwitsTV, and Twitter/ST accounts) to share their ideas – not all of which are based on technical analysis. Like any investor, these traders are always looking for new ideas. IROs and IR firms might find it useful to contact some of these folks and present their stories. Assuming there’s an understanding that their message will be shared using at least one of ST’s various platforms, public companies can benefit.
Investor relations officers should also be interested in StockTwitsTV.
StockTwitsTV – Real-Time Market Analysis, Financial Education
StockTwitsTV (“STTV”) is ST’s version of a business and market focused television channel. It’s an online, interactive medium where ST community members talk stocks, take questions, educate, and pontificate. Of particular note, STTV enjoys great stock charting technology that allows hosts to effectively illustrate their technical ideas. CEO Lindzon has blogged that 2010 will bring a more regular lineup of STTV shows covering a wide variety of market related topics.
Once the STTV team solves their technical issues, they will have all the tools to become a valuable asset to investor relations. STTV can be a platform for public companies to present their stories just as they would at investor conferences. They can read the same scripts and present the same PowerPoint slides they would at conferences and thereby increase the reach of their presentations.
If they so choose, public companies can also take questions from ST community members similar to what IR vet and Sharon Merrill Associates President Maureen Wolff-Reid articulated recently on her firm's blog:
“Some IROs believe that participating in investor conferences where management delivers a standard 20-minute IR pitch is not the most effective use of their time, especially since most companies post their investor presentations on their IR websites. A better alternative is to attend conferences with a “fireside chat” format. Fireside chats are often more valuable for both management and investors because they facilitate an interactive dialogue."
With fewer opportunities to engage the investing public while still abiding by RegFD, this seems like a logical, new platform for public companies to leverage. Putting out a press release announcing an STTV appearance, reading an introductory disclaimer, and being careful about not disseminating any non-public information are obvious requirements. With many traders, money managers active in the ST community looking for new ideas, this seems like a no-brainer especially for micro-cap and small-cap public companies looking to appeal to the retail segment.
Questions for Earnings Calls
As discussed in my previous post on investor relations 2.0, public companies (especially micro-cap and small-cap) have suffered due to the decline of sell-side analyst coverage. Fewer sell-side analysts has led to fewer participants on public company earnings calls. As the Q&A portion of earnings calls is one of the few chances public companies have to speak candidly about their businesses, the lack of analyst participation has been and will continue to be a sizeable missed opportunity. Without analyst questions, there’s little chance for management teams to elaborate, go off-script, and/or provide greater color on their operational activities.
ST’s real-time platform offers IROs and public company executives a solution -- the opportunity to engage investors by taking their questions directly during the Q&A. If your earnings call has limited participation and you have a story to tell you might consider addressing questions through ST’s real-time platform.
Recently, Microvision (ticker: MVIS) used its blog to solicit questions for an upcoming earnings call (Note: They also used their Twitter account.). While the Microvision example took place during the week-long period prior to the company’s earnings call, the ST real-time platform could offer more relevant last-minute questions from those who’ve had a chance to review the actual earnings announcement.
For those concerned about violating RegFD, see the following from Microvision’s communications director in the comments section of the aforementioned blog post:
“Hi Madfgurtbn, we used all the questions provided above as the foundation for addressing the content in the conference call. If we missed something specific that you wanted addressed, let me know. However, please note, we can not answer any questions regarding sales forecasts, quantities of shipments, financial disclosures, or partnership details that are not already public through a broad distribution of a press release.”
Monitoring Investor Sentiment
Some IR firms have told me that they look to ST solely as a means of measuring investor sentiment. IRWebReport’s Dominic Jones made a compelling case for this late last year.
StockTwits Investor Conferences
ST is clearly a great platform for empowering the retail investor. I wouldn’t be surprised to see an ST-run retail investor conference for micro-cap and small-cap companies in the near future. Just as ST has been organizing offline meetups they can also leverage their community to organize investor conferences. Public companies with limited institutional ownership would undoubtedly benefit from this exposure.
There are a wealth of valuable, online opportunities for public companies looking to engage investors using social media. To date, most companies have failed to take advantage despite the fact that a substantial number of public companies have already paved the way with remarkable results.
As is SeekingAlpha (discussed here), StockTwits is well-positioned to respond to the social media needs of public companies. The ST platform is especially relevant for micro-cap and small-cap public entities looking to reach throngs of retail investors.
I can be reached at ezra dot marbach at gmail dot com