Whether you love it, loathe it or simply fail to get it, the Australian Stock Exchange says social media is something you can no longer ignore.
Working closely with the Australian Securities and Investment Commission, the ASX recently updated its guidance on disclosure, advising companies to monitor online for sensitive information to ensure that the market trades fully informed. Further, company secretaries must consider its impacts with respect to risk.
It’s not hard to understand what’s driving the decision.
To set the context, globally eight new people come online each second using predominantly mobile or social networks, and the value of these online exchanges is adding up, both with respect to volume and impact.
Social media has become an integral part of everyday life according to Media Bistro, who found that every day:
- Almost 500 million people log onto Facebook
- 4 billion views are made on YouTube
- 175 million tweets are sent on Twitter
- Nearly 3.3 billion searches are done on Google
- And, despite the existing 4.8 billion mobile users, more mobile phones are sold than babies are born
While the statistics are mind-boggling, companies have been slow to translate them into a direct business impact.
It’s a lay down misère that companies must be where their customers are and there is increasing awareness that peer-to-peer recommendations on these platforms carry weight.
As a result, the concessions we’ve seen around social media use have been largely in the marketing and sales space.
But this approach fails to recognise that the impacts of a channel that is ubiquitous cannot be managed in or by silos, but must be wholly integrated into corporate strategy, including governance and risk.
Online information is unbounded; the speed at which it travels leads to direct market impacts (the executive and board domain).
For example, in January this year, the share price of Whitehaven Coal dropped 6% after a fake press release lit up the online networks.
The release claimed to be from ANZ overturning a recent loan to Whitehaven that would have had a significant impact on its Maules Creek project.
Both Whitehaven and ANZ later confirmed the hoax, but not before $314 million was wiped off the share price and the company was placed in a trading halt.
While market rumours are nothing new, social media means information (true or false) can reach people – shareholders, the media, regulators – faster than a company can respond.
- Would you know if there was an online issue that could impact your share price?
- Do you have a strategy for responding?
- Do you own the digital assets (website, Twitter feed, Facebook page and so forth) that would allow you to counter misinformation where it’s happening: online?
Lest you think Whitehaven was a standalone case, in Australia last year, trading of Macmahon Holdings was halted when hoax emails prompted takeover speculation, and retailer David Jones was also the subject of a false takeover bid.
And with digital growth expected to increase at around 10% a year in G-20 nations according to BCG, these incidents are likely to increase, not decrease.
But direct attacks on companies are not the only thing causing market jitters.
Earlier this year in the US, stocks plunged temporarily when an announcement about a bomb at the Whitehouse was made via the Associated Press (@AP) Twitter account, which had been hacked.
Action by Twitter (which suspended the account) and AP meant the issue was managed quickly.
But reports suggest over $20 billion worth of stock changed hands during the brief trading hiccup.
The event reinforces the importance of having a strategy that can be activated quickly to minimise damage and restore market confidence.