There’s been a fair amount of media comment following the recent regulatory announcements that the U.S. Securities and Exchange Commission (SEC) will permit companies whose shares trade on the NYSE that they can use social media platforms to report their quarterly financial earnings.
This could mean that the carefully worded earnings announcements, full of nuance and carefully balanced statements (just like this blog post) – that financial communications advisors have been producing for years – could go the way of the dodo.
Is Ketchum’s global network of experienced capital markets professionals based in all the major global liquidity centres, with over $100bn worth of transactions, about to become redundant?
FT Lex suggests that instead of the classic 1-2 pager designed to convince investors, analysts, media and Uncle Tom Cobely that a company is a great organisation, with talented leadership, doing as well or better than could be expected in the prevailing environment (note the nuance again), companies might release the following tweet:
“#Alcoa Q1 results Rev$25b+5% OP$700m+5% EPS$0.30+3% Ebitda$2b+15% Capex$1.2b+0.2% Tax$200m+5% WACC12% Outlook: US+Asia++EU—Vols-Prices++”
As a relatively new convert to twitter (@padsky for geopolitical, economics, energy, sport and booze-related stream of consciousness) I find the thought that it will make me and my peers redundant quite scary. All a little Matrix / Terminator / Blade Runner. Artificial Intelligence replacing Human Intelligence.
But wait. What are Financial PRs really employed to do? At the heart of it, we are a subset of corporate reputation, giving strategic communications advice to the Boards of listed companies of any size, as to how to most positively position the company and its securities within the capital markets environment – and within the vertical industry universe it inhabits. The choice of which channel to distribute earnings information is an eye catching, but fundamentally tactical decision.
Before we get to suggesting how a tweet should be worded, we should start from the beginning and ask a few key questions: “How do these earnings fit into the corporate narrative? Are they in line with market expectations? Where do they take the company – what’s the next step?” Remember the numbers are in of themselves not important without market context. Just because you’ve made $1bn profit, if all your peers are making $1.8bn, things are not as rosy as they might at first appear.
Developing this theme, effective financial PR is about creating a positive narrative within capital and wider industrial markets. Public companies have to communicate with their shareholders at mandated times, either reporting financials, or announcing news that is “material” to the share price.
Communications strategy needs to combine company performance compared to wider market dynamics and the on-going financing and operational needs of the client. It’s as much about where you’re going as where you’ve been. You can be bullish about the future off the back of a weak quarter, if you are confident that the future will be positive, but remember the markets are full of the ghosts of over-promised performance. Nobody likes a share ramper – they all get found out in the end.
So where does this leave Twitter? Well, the communications and therefore investment risks are pretty clear – 140 characters do not allow much space to either manage risks or grasp opportunities. This doesn’t mean that we should ignore a powerful channel to both the primary capital markets targets and the wider media channels we’ve been traditionally hired to influence. As my colleague in Munich Markus Reuther pointed out, social media could be a great way to find new shareholder groups previously missed by traditional brokers.
Social media as a fund raising tool? Don’t knock it. “Crowd funding” is already working for small private fund raisings.
What this does, it means is that we need to focus on developing as clear a strategy as possible. This way, we can learn how to distil the strategy and advisory work down into one tweetable communication. The one big idea that we want investors to take away and that will drive the audience to find out more.
Pretty much what we’ve always been hired to do anyway.