Zynga?s latest quarterly earnings report, released on Wednesday, came in the typical format and was accompanied with the usual financial tables investors expect.
But the social gaming firm that counts FarmVille among its games included a new addition: a 204-word paragraph encouraging investors to check its corporate blog, Facebook and Twitter pages for regular updates. It was just one of dozens of companies taking advantage of newly clarified rulues from the Securities and Exchange Commission that have now blessed the use of social media sites to disclose financial information.
Although social networks have proliferated for years and the public more readily turns to Twitter than the SEC?s Edgar Web portal for updates, the agency just a few months ago was still evaluating whether using newer outlets would violate its rules. Even with the updated guidelines, uncertainty over what exactly the commission will allow has meant that many companies, and their legal teams, are playing it safe this earnings season.
?Right now it?s like the Wild West,? said Broc Romanek, editor of TheCorporateCounsel.net , a web site that focuses on SEC rules and regulations. ?The SEC?s guidance is definitely going to need to be further refined.?
For instance, when General Electric released its earnings last Friday, the company mentioned its Twitter and Facebook accounts for the first time, noting that they ?contain a significant amount of information about GE, including financial and other information for investors.? A quick check showed that G.E. has at least 10 different Facebook pages and 10 different Twitter feeds. A company spokesman, Seth Martin, however, said the conglomerate would continue to rely on news releases to communicate material information. ?While we currently have no plans to disseminate material information using social media, we will comply with SEC guidance as it evolves,? Mr. Martin said.
Others may simply be hesitant to leap into the world of 140-character messages out of fear of security. Earlier this week, the Dow Jones Industrial Average briefly plunged 150 points after hackers gained control of The Associated Press?s Twitter feed and falsely reported explosions at the White House. A similar fake report on a company stock could easily cost investors billions in a matter of seconds.
Not long ago, regulators regarded social media sites with skepticism. Until now, information that has the potential to affect a company?s stock price had for the most part been relegated to the bureaucratic sounding form 8-K, the SEC?s document of choice.
Last year, the SEC warned Netflix that it might file civil claims after its chief executive, Reed Hastings, bragged about subscriber numbers on his Facebook page. But after the ensuing reaction against the agency?s view, the SEC gave in a little, saying this month that social networks were acceptable news outlets ? as long as shareholders knew which to check. The new rules update the SEC?s Regulation Fair Disclosure, which requires companies to publish material information to all investors at the same time.
A spokesman for the agency, John Nester, argued that the new guidance on social media should not be too confusing, given how quickly companies adopted a 2008 rule that allowed the use of corporate web sites in addition to SEC filings.
