Cashtag Blues

Last summer, with relatively little fanfare, Twitter added clickable stock symbols to its tweets.
This is how it works: Add a “$” in front of a ticker symbol in Twitter’s search box and you’ll be able to engage in conversations about a particular company, similar to what would happen with a hashtag “#” followed by the name of your favorite pop star.

twitter
In social media circles, introducing the “cashtag” is yet another way to stimulate chatter among people
who are interested in a particular topic, such as public companies. But like all seemingly helpful social media tools, the cashtag may, in fact, send your stock tumbling down in 140 characters or less.  We recently observed such a scenario.

Shortly after market open on an otherwise average trading day, an anonymous tweet began surfacing about an FBI raid on a certain public company.  Soon the company’s trading volume began rising and its shares began
dropping, so much so that, as IR representatives for the company, Bloomberg called us to find out if the rumors on Twitter were true.  We confirmed that the rumors were false, and soon the stock corrected itself.

We later learned that the SEC opened an investigation on the tweeter for a possible “10b-5” infraction, which is when someone makes fraudulent claims in connection with the purchase or the
sale of a security.

Rumors surrounding public companies have been swirling about the Internet long before the cashtag, but this example serves as an important reminder that new information channels, carrying potentially market moving information, are reaching influential audiences at light speed.  And that means the onus will increasingly fall on investor relations professionals to ensure chirping birds are not making fraudulent claims.

 

Evan Pondel, epondel@pondel.com

Iran Sanctions Affect Public Companies

It’s a little disconcerting when you think about it, but interesting nonetheless how politics and the world order is infiltrating corporate life.

Iran Elections

Iran Elections (Photo Credit: Flickr: bioxid)

 
This month, public companies must begin reporting–in quarterly and annual reports to the SEC– transactions that they or any of their affiliates have with Iran.  In turn, if such a report is filed, a federal investigation will be triggered.
 
The new mandatory reporting requirement stems from passage last year of the Iran Threat Reduction and Syria Human Rights Act of 2012, signed into law in August by President Obama.  The website www.govtrack.us called the Act a strengthening of Iran sanctions “for the purpose of compelling Iran to abandon its pursuit of nuclear weapons and other threatening activities.”
 
Previously, the SEC’s Office of Global Security Risk was charged with monitoring public companies’ activities that could relate to any of four countries–Iran, Syria, Sudan and Cuba–designated by the State Department as “sponsors of terrorism.”  Now, issuers are required to make active disclosures relative to Iran, rather than merely respond to SEC inquiries.
 
The major news outlets haven’t said too much about the new Act, which, granted, will impact only a relatively small percentage of the thousands of public companies–mostly shippers, financial institutions,
insurers and reinsurers. Nevertheless, how such companies ultimately communicate their Iranian transactions and the ramifications on their stock prices and customer reactions will be fascinating to watch.

 

Roger Pondel, rpondel@pondel.com

To Guide or Not to Guide

Should companies provide financial guidance to the investment community?  That is the age old question, at least in investor relations circles.  Ask 10 CFOs and you’ll probably get 10 different answers. Add 10 IROs to the mix and now you’ll likely have 20 different answers.  As usual, there is no one size fits all solution.
 
A Skadden, Arps alert debated the pros and cons.
 
Pros:
 

  • Gives analysts reliable data points from which to assess their own projections.
     

  • Reduces investor uncertainty.
     

  • Potentially averts trading volatility.

 
Cons:
 

  • Encourages short-term thinking.
     

  • Creates disclosure issues.
     

  • Distorts investors’ perceptions.

 
Chad Stone, CFO of Renewable Energy Group, told CFO Magazine that “Offering an indication of our expected performance creates an opportunity for investors and analysts trying to understand and model our business.”  He believes that the absence of quarterly guidance would make it difficult for the investment community to understand how his company will perform.
 
Stone is not alone.  A survey by the National Investor Relations Institute found that more than three quarters of those who responded continue to provide
financial guidance.  Of those, 37 percent give quarterly earnings guidance and 39 percent give quarterly revenue guidance.
 
On the other side of the debate, Diane Morefield, CFO of Strategic Hotels & Resorts, believes that quarterly guidance is too short-term focused.  “I would simply hate being boxed in by guidance every three months,” Morefield told CFO Magazine.
 
Many NIRI members agree.  The number of companies providing some type of financial guidance has fallen from 81 percent in 2010 and 85 percent the year before.
 
As a big proponent of transparency, and making it as easy as possible for the investment community to understand your business and financial expectations (especially true for micro-cap companies), I am firmly in the guidance camp.  Whether it’s a revenue range for the quarter or year, point guidance for EPS, or a qualitative discussion of the trends likely to impact future performance, some information is better than none in getting stakeholders on the same page and managing expectations.

 

Laurie Berman, lberman@pondel.com

Herbalife: Ackman vs. Icahn

 
As an investor relations professional, there is nothing more interesting going on now than the public drama surrounding the activist attack on Herbalife.  To remind you, Pershing Square Capital Management’s Bill Ackman conducted a highly public attack against Herbalife with a 300-plus page slide presentation, going short nearly a billion dollars. Management then countered with a three-hour long investor meeting to rebut and explain the company’s side of the story.
 
Meanwhile, activist investor Dan Loeb goes long, purchasing nearly 8% of the company.  And If the battle of activist titans could not get any more interesting, I recently listened to Carl Icahn and Bill Ackman bickering for nearly 30 minutes on CNBC, with Herabilife as a backdrop.
 
Perhaps the candid nature and public name calling took the reporter back a little, because he was reduced to a bystander, but Icahn never let on if he was long or short Herbalife – not that he would.

 

Matt Sheldon, msheldon@pondel.com

Social Media’s Global Growth

The stats on social media’s global growth are staggering.  A graphic recently posted in Mashable.com illustrates how the world consumes social media.  And boy does it!

Facebook Logo

 
We all know that Facebook now has one billion users in 127 countries and is the top social media destination.  It’s also interesting to learn how countries and regions outside the U.S. are adopting social media like Asia, which has grown to more than one billion Internet users in a little more than ten years.
 
Or that 800 million users visit YouTube each month with more than 70 percent of the site’s traffic coming from outside the U.S.  In fact, 700 of these videos are shared via Twitter every minute.  Moreover, LinkedIn increased its membership nearly by half in the last two years with Turkey, Brazil and Indonesia seeing the largest user growth.
 
All this data can seem very overwhelming.  Even though the growth of social media seems to be a no brainer when it comes to global marketing, many executives still fail to grasp the opportunity.  Let’s be clear: social media is not slowing down anytime soon.
 
Not all social media platforms may be relevant for every business organization.  There is no one size fits all solution for tackling this new media landscape.  However, given the global economy and the opportunities social media presents, these new platforms can help organizations engage with consumers, customers, and even investors, all over the world.  It’s like six degrees of separation on steroids. The proof is in the data.
 
So, the world is consuming social media.  Are you?

 

George Medici, gmedici@pondel.com