Breaking news: The Securities and Exchange Commission recently announced that companies may announce key information, that would be an interest of investors. Under the new rule, companies can release materials through social network sites as long as the investors are informed ahead of time which channel will be used.
The latest guidance by SEC followed Reed Hastings, CEO of Netflix, revealed company materials on Facebook last July. Hastings had posted on Facebook that Netflix had streamed 1 billion hours of movies and TV shows in a single month. The result? Netflix's shares rose more than 13% that day from $70.45 to $81.72, which was the stock's highest level in two months.
This method of sharing was used by Elon Musk, CEO of Tesla, on March 25th. CEO of the electric-car maker tweeted "Really exciting @TeslaMotors announcement coming on Thursday. Am going to put my money where my mouth is in v major way." That Monday, right after his tweet, Tesla's shares rose 2.4% to $38.40, while Russell 1000 Index advanced 10%.
The rise in stock prices is clear evidence of how important these information is to investors, and how effective social media was in delivering the news. What does it mean for day-to-day practices at companies?
For now, companies won't jump to making important announcements solely on social media channels. The main concern is that Twitter names and handles can easily be faked. Therefore companies will stick to the traditional method with key information. However, there is an overall support for the new move by the SEC. With the growth of social media and the evidence provided by Netflix and Tesla, companies will gravitate towards Facebook and Twitter, eliminating the need for official press release.
What does it mean for investors? They simply have to "like" or "follow" the company to obtain information, instead of digging through SEC filings and tracking the news.
The latest guidance by SEC followed Reed Hastings, CEO of Netflix, revealed company materials on Facebook last July. Hastings had posted on Facebook that Netflix had streamed 1 billion hours of movies and TV shows in a single month. The result? Netflix's shares rose more than 13% that day from $70.45 to $81.72, which was the stock's highest level in two months.
This method of sharing was used by Elon Musk, CEO of Tesla, on March 25th. CEO of the electric-car maker tweeted "Really exciting @TeslaMotors announcement coming on Thursday. Am going to put my money where my mouth is in v major way." That Monday, right after his tweet, Tesla's shares rose 2.4% to $38.40, while Russell 1000 Index advanced 10%.
The rise in stock prices is clear evidence of how important these information is to investors, and how effective social media was in delivering the news. What does it mean for day-to-day practices at companies?
For now, companies won't jump to making important announcements solely on social media channels. The main concern is that Twitter names and handles can easily be faked. Therefore companies will stick to the traditional method with key information. However, there is an overall support for the new move by the SEC. With the growth of social media and the evidence provided by Netflix and Tesla, companies will gravitate towards Facebook and Twitter, eliminating the need for official press release.
What does it mean for investors? They simply have to "like" or "follow" the company to obtain information, instead of digging through SEC filings and tracking the news.
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