October 28, 2016
Around the world, guidance on how listed companies vary, leaving companies reluctant to embrace social media as fears that they may ultimately put investors at risk creep in. The United States have clearly issued guidance, but in other major markets, like the UK, Australia, and Hong Kong that guidance is a little less clear. This series on Capital Markets Communications outline each market.
In Australia, companies are increasingly using social media to communicate with their stakeholders.
In May 2013, the Australian Stock Exchange (ASX) implemented a series of obligations in their revised Guidance Note 8 on listed companies with respects to social media. These changes recognise the importance of social media, defined as social media accounts, investor blogs and chat-sites, and their increasing role in providing commentary around the Australian stock market.
As part of the Guidance Note, ASX listed companies are now obligated to:
Where an ASX listed company is negotiating a market-sensitive transaction, or making an announcement to the market, companies must also:
Monitor any investor blogs, chat-sites or other social media it is aware of that regularly posts comments about the entity;
If a listed company becomes aware that market sensitive information has not been given to the ASX under Listing Rule 3.1 has been released to a section of the market or the public, including through social media, the entity is obligated to give the information to the ASX.
Monitoring and reporting obligations for speculation and rumours
ASX companies are often the subject of market speculation and rumours around their potential trading and business activities. As part of the Guidance Note, the ASX has recognised that rumours can arise outside of traditional communications mediums, through social media, bulletin boards, chat sites, Facebook, Twitter and other social media sites.
When a report or market rumour:
The speculation has caused or will likely cause a material change in the market price or traded volume of the security;
The listed company is under an obligation to report the information to the ASX in a timely manner, or the ASX may exercise their power to compel the company to produce the information.
The ASX has clarified they do not expect companies to respond to every market rumour, especially when the rumour appears to be “mere supposition, idle speculation” or “confirms a matter that is generally understood by the market”.
For further information, see ASX Listing Rules, Guidance Note 8.
While there are no clear rulings stating whether social media should or should not be used as a communication channel for listed companies, there are guidelines accepting that the market will communicate on social media and listed companies are expected to keep an eye on it. FTI recommends taking advantage of social media as a communication platform for financial reporting as you own the channel, increasingly investors are online listening and as the discussions are happening anyway, you should be there to frame the conversation.
An effective digital strategy will ensure both positive and negative news is shared and appropriate risk mitigation strategies are in place. A company who live tweets earnings calls for good results but is then silent on social media during a period of poor performance does more damage than not engaging at all. Consistently communicating with your audience will increase goodwill and allow companies to tell their side of the story on their own platform.
FTI evaluated the performance of ASX 100 companies on social media at the time of their latest financial results announcements.
We found that 49 of ASX 100 companies shared their latest full or half year financial results on social media.
Companies that are embracing social media are seeing good levels of engagement, with 65% of results-related posts receiving ‘likes’, ‘favourites’, ‘retweets’ or ‘shares’.
Overall, we also saw a notable positive trend in the use of social media channels to convey financial performance highlights and events to audiences.
Wesfarmers’ posts were most effective, resulting in 520 interactions. Other businesses that are embracing the channels are using a range of media to tell their story including Periscope, GIFs, cashtags, infographics and effectively using the functions within each channel. Telstra, QBE Insurance, Fortescue Metals and Rio Tinto are some notable ASX-listed businesses who are using social channels well for financial communications.
Despite this positive trend, our research also suggested that most ASX 100 companies use social media to broadcast pre-planned messages, not to engage with their audience in a live dialogue – the majority of companies didn’t interact with stakeholders online, respond to questions, share coverage, or ‘retweet’ commentary.
In a 2016 study of marketing activities associated with IPO prospectuses, the Australian Securities and Investment Commission (ASIC) found that “in the near term, it is unlikely that social media will become more important than traditional marketing methods.”
ASIC acknowledged that given the strict regulation of advertising information an issuer can provide to the public during an IPO under section 734 of the Corporations Act, social media use for IPO advertising is inherently limited.
However, in a move that has been described as “ahead of the game”, ASIC has indicated that “if firms and issuers wish to use particular forms of social media in the future that are not well adapted to complying with the obligations of section 734, we would be open to exploring whether there might be ways to meet the policy aims of section 734 without requiring strict compliance with its terms.”
FTI Consulting’s Australian Strategic Communications team are experts in helping companies tell their story including how companies best equip themselves to communicate with capital markets via social media.
We strongly recommend that listed companies have a social media monitoring program in place to adhere to Guidance Note 8 requirements. Listed businesses should also consider taking advantage of social media as a communication channel for their financial results. Companies are best placed to utilise social media with a strategy in place to mitigate risks and use resources effectively.
In general, information otherwise announced via the Australian Stock Exchange should be announced the moment after it has been disclosed via rational methods, through social media channels.