Guest Blogger: David Coe, managing editor of Investor Torque
This blog was originally posted on David Coe's LinkedIn page. Investor Torque supports investor social media campaign by telling the story in many ways: LinkedIn profiles of your executives, animated business videos, information graphics, on-camera interviews, landing pages, and investor presentations. You can connect with them at www.investortorque.com
Why would listed companies bother with social media?
After all, an iron ore company does not sell any more iron ore to a Chinese steel mill because of its Facebook page. A biotech working on a cure for cancer doesn’t even have a product to sell.
That’s the mistake that hundreds of ASX-listed companies are making. They think social media is about customers and clients only.
Companies that use social media to reach investors are generally rewarded with greater market liquidity and tighter bid-ask spreads, according to research out of Melbourne and the US.
That has also been the experience of many clients of Investor Torque.
Instead of struggling for press and broker coverage, they take their news direct to the markets and build communities of investors, journalists, wealth managers, analysts, brokers, fund managers and others who opt in for their news.
The companies are then able to reach the clients of more than one broker, which is handy during capital raises when they want as many downloads of offer documents as possible.
And during crises, the companies can mobilise shareholders.
A study of more than 3,500 ASX releases by Victoria University’s Maria Prokofieva found:
Smaller companies, which are generally less visible to investors because they get less coverage by the press and analysts, tend to be more effective in employing Twitter to engage with investors.
Social media enables companies to establish a direct rapport with their existing and potential investors instead of relying on the business press and analysts to promote their financial information.
Including hyperlinks in tweets increases retweeting and attracts the attention of more investors.
Including hashtags makes it easier to find and share information about companies and topics relevant to them.
Don’t tell anyone but those 4 points are the basis of Investor Torque’s ability to bring investors and companies together.
That’s why a client with a $40.1 million market cap has been reaching as many people as Anglo American, which has a market cap of $25.7 billion.
In one 2-week period, our client set a house record by reaching 466,000. They all regularly reach 20,000 to 50,000 a month.
A Stanford University study had similar findings to those of the Victoria University study.
The power of investor social media is not only being recognised by US stock exchanges, it is being harnessed by them.
The New York Stock Exchange kicked things off a couple of years ago by giving tips to companies on how to use social media to reach investors.
Then the Nasdaq started providing social media campaigns for companies listing on it so that their IPOs would be as successful as possible.
More recently, the CBOE has created benchmark performance indexes based on social media sentiment.
A valid but overstated concern among many companies is the compliance risk. The US has a much more liberal regulatory regime and ASX companies fear upsetting ASIC.
The simple solution is to use social media to amplify ASX announcements after they have been released and to post links to presentations and videos on the company website.
To keep current and potential shareholders engaged on social media, companies should also curate content from authoritative sources that validates their investment cases.
For example, lithium investors are interested in what Tesla is doing with batteries, gold investors want to know what forces are affecting the gold price, and almost all investors want to know what interest rates are likely to do.
Remember, individual investors are limited in time and resources and are unable to track all securities and their announcements, let alone keep up with the specialised reading that many executives are across.
That means prices don’t always reflect all available information. And that means the market doesn’t always realise the true value of a company’s shares.
Are you looking for more information on how social media is changing the investor's toolkit in the mining industry? Join our Webinar with David in May and expand your Investor Relations messaging! For a formal invitation to this FREE webinar, provide your email below!