October 26, 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 the UK companies are increasingly disseminating market-moving information via social media, proving that social is no longer just a channel for consumers, but a tool for businesses looking to control their own flow of news. Communication in the financial world is changing. An example of this, in the last quarter of 2015, The London Stock Exchange launched a social network for public companies and investors that combines elements of Facebook, Twitter, and LinkedIn. ‘Elite Connect’ lets companies communicate with investors and advisers online through its platform. Users have their own profile page and are able to communicate through messaging and chat features, much like on Facebook. Investors can also sign up to “follow” companies, like they do on Twitter, and see company’s management teams and filings in a similar way to LinkedIn.
Further evidencing the changes to the communication landscape for capital markets, the research presented in FTI’s fourth instalment of the Social Divide in the City report, which analyses FTSE 100 companies’ use of social media to support results communications, shows that there is evidence of a clear divide between those who are truly embracing the opportunities for engagement online and those who are not. Here we ask the questions:
Companies with shares listed in the UK must notify major new developments that may affect their business if the development may lead to a substantial share price movement. Companies must also notify information concerning a change in financial condition, performance or expectation of performance if the change would be likely to lead to a substantial share price movement.
An example of a UK-listed company signposting via the Regulatory News Service (RNS) that social media will be utilised.
These reporting obligations are contained in, amongst others, the Listing Rules, the Financial Services and Markets Act 2000 (FSMA) and the FCA’s Disclosure Rules and Transparency Rules (DTRs). The FCA also issues guidance in relation to these regulatory frameworks, but has yet to issue specific guidance with regard to if social media can be used to announce financial information.
This contrasts with the SEC, which, in 2013 issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD – the equivalent to the UK DTRs) so long as investors have been alerted about which social media will be used to disseminate such information.
1. The lack of clear guidance from the FCA can be confusing for companies and may be the key reason why companies are not engaging in investor relations and capital market communications via social media.
2. Regulation in the UK itself is not preventing companies from using social media to engage with their investors. It has been shown, with the support of research from FTI, that when social media is utilised it breeds rich content and engagement, enhancing company communications.
3. Investors thrive on stable, consistent communication from listed companies, and are slow to adapt to change. Time and understanding are key to changing the mentality of investors and the launch of the London Stock Exchange’s Elite Connect is a clear sign that change is underway at the institutional level and that this pace of change will continue. Companies slow to adapt to this change will miss great opportunities to engage with investors and promote company news.
FTI analysed each FTSE 100 constituent at the time of its latest results announcement, including the extent to which companies are using social channels and the effectiveness of the content they are sharing, measured in terms of volume, quality and impact. BP, TUI Group and Vodafone Group came top.
One of the reasons for BP’s outstanding performance in the index is the company’s long-term and consistent use of rich media. An overwhelming majority of BP’s tweets and LinkedIn posts contain images or videos, and the company is using specialist image-driven platforms, including Instagram, to communicate with its stakeholders.
FTIs London Strategic communications team are experts in helping companies manage change, including how companies equip themselves to communicate with the capital markets via social media. As a minimum, listed companies, as part of a broader social media strategy, should consider tweeting their financial results.
This document contains FTI’s guide to tweeting on results day as an appendix. In general, information otherwise announced via the London Stock Exchange should be announced the moment after it has been disclosed via rational methods, through social media channels.