Dominic Jones

Dell Shares Insights on Institutional Investors' Use of its IR Blog

We received more than 70 responses with 60%/40% split respectively between institutional investors and research analysts. Here’s what we learned:

More than half of the respondents read our blogs/Vlogs and view this as an effective means of communicating.

There are still many folks out there that are unaware of our site.

You value quick-reads due to time constraints and convenience.

You prefer clear, concise messages around specific topics.

Some respondents are unable to view video blogs (VLogs) or have a preference to read this information vs. watching a short video.

Well, we’ve considered this feedback in addition to other comments and will respond accordingly. As a result, we are taking the following actions:

We will send an email blast on blogs and Vlogs posted going forward. If you are currently not on our distribution list and would like to be added, please contact us at investor_relations@dell.com.

Starting with our next Vlog, we will attach a transcript for those that are unable to view the video or just have a preference to read it

We have heard you loud and clear on topics to cover. We will be increasing the frequency of posts around other popular suggestions: new products/technologies, industrial/macro trends, and Dell’s strategy.

For some of our Vlogs going forward, we will ask you in advance for questions you’d like answered and include in our discussion.

via en.community.dell.com

Transcripts are key, and always have been. Seems some investment houses are blocking YouTube. Email still trumps RSS.

In terms of topics they want to see, it’s the same stuff retail wants — background.

Overall, no real surprises.

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Kinross Gold ( $KGC ): We have absolutely no responsibility for our Twitter account!

THIS week, StockTwits alerted its followers to the presence of Kinross Gold Corporation on Twitter and StockTwits. Cool, I thought, another company that groks the utility of putting a $ sign in front of your ticker symbol ($HPQ and $ABX also do it).

But when I went to the Kinross website and clicked on a link to follow the company on Twitter, up popped the following alert (emphasis added): “You are leaving the Kinross Website and Kinross is not responsible for the content, accuracy or timeliness of the website to which you are being directed by this link.”

This is a classic “exit disclaimer” that lawyers consider best practice (regulators don’t actually require them) when a company links to third-party content.

But here’s the thing: how can they disclaim responsibility for tweets that they are writing themselves? Clearly, they can’t. The exit disclaimer does not apply. More to the point, Kinross is responsible for all of the content, accuracy and timeliness of its tweets.

With respect to timeliness, I noticed that the link to Twitter on the company’s IR homepage is placed in a box under a heading that says “Alerts & Information.” In the same box are links to the company’s email alert utility and its RSS feeds. This clearly suggests to any reasonable person that Kinross is using Twitter as way for investors to receive accurate and timely alerts from the company. That’s the expectation they’re setting.

Kinross seems to get that timeliness is important for alerts because on it’s RSS feeds page, it makes this claim (emphasis added): “Subscribing to an RSS feed means that you will receive new content in real-time, without having to continuously visit a website.”

In real time. They get that timeliness is important to investors. But here — again — is the thing. RSS is not real time. Yes, it’s possible to set up real time RSS and Atom alerts with Pubsubhubbub or RSSCloud, but I checked and Kinross’ feeds aren’t using either of those methods.

They’re using classic pull instead of push, so the typical delays will be somewhere around 30 minutes, or whatever interval users’ feed readers are set to poll the feed. Which brings me to why I’m bringing this up. I’m not trying to make anyone look stupid. I’m trying to help prevent everyone in IR and social media from looking stupid.

There’s a lot this sloppy stuff going on right now on the social web, and it’s a problem for those of us who want companies to adopt new technologies, but do it properly. When something goes wrong, all the IROs and lawyers who are looking for any excuse to stay off the social web will have their told-you-so poster child. We shouldn’t make it so easy for them.

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Get mail, go online and vote -- how confusing can that be?

So I am happy to report that soon the Commission will take action designed to improve e-Proxy, by establishing educational efforts to help investors understand e-Proxy and their rights, as well as amending our rules so that the process is less confusing to investors.

via sec.gov

It’s not a lack of understanding or confusion, but a lack of desire to engage in a boring, dehumanized and ultimately pointless exercise.

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Nah, there's no institutional types in that lot

via insidefacebook.com

I have to laugh when I see IR experts counseling that Facebook is for “retail audiences.”

You telling me there are no portfolio managers, equity analysts, hedge fund managers or registered reps in amongst those 400 million users?

Ridiculous.

Sure, it’s mostly retail, but there’s also a lot of professionals on Facebook.

And in a sense, it’s probably the single best social network on which to befriend an analyst or fund manager.

Why? Two words. Photo album.

Think about it.

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Annual reports are like birthday cards

I was thinking today that getting a printed annual report is like getting a birthday card in the mail from a distant friend. It’s a relationship document, simply an acknowledgment that you’re special.

And when it’s a slim little “summary report,” it’s interpreted that the company doesn’t love you as much. And when its a 10-K wrap, it’s a bit insulting and you know they don’t give a crap about you.

But when it’s a nice glossy annual report with lovely pictures and lots of financial stuff you’ll never actually read, you feel important. Everyone likes to feel important.

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Great post on retail investors, but you can almost hear IROs groan

Investing is a social undertaking as much as it is a means to an end, therefore the retail investor is happy to discuss with fellow stockbrokers, peers and associates if a company story appears of interest.

The social piece is important for retail investors. They like a group setting, where they can hear from management, ask questions specific to their own interest, and listen to those of others within their community.

via iralert.com

Silvia Jorgensen writes well and she argues her points clearly. However, I think she’s wasting her breath.

Many IROs aren’t interested in dealing with retail investors. Retail investors are A LOT OF WORK, in part because there’s a lot of them (or there was until IR departments started ignoring them).

No, it’s much more fulfilling for IROs to deal with a handful of investment pros and executives than to rub shoulders with the unwashed on Main Street.

Which explains why there are so few real IROs with formal social media accounts. And why only about 1 in 5 IROs post their contact information on their websites.

This is a profession that doesn’t have the resources to deal with legions of little folks trading 225 shares at a time. Nor do they really want to.

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Did your IR firm tell you about this study?

David Solomon, Assistant Professor of Finance and Business Economics at the University of Southern California Marshall School of Business, has a humdinger of a research paper out on the damaging influence IR firms can have on their clients’ stock prices.

It’s an absolute must-read for anyone in the investor relations profession, and for investors. Funny enough, I’ve not seen a single IR firm representative mention this study. After you read it, you’ll know why.

Here’s the meat of it:

“I focus on whether IR firms spin their clients’ news by creating more positive media coverage and perceptions of the company. The specific method of spinning the news that I examine is increasing coverage of a company’s good news relative to its bad news. Bushee and Miller (2007) find that IR firms increase overall media coverage. The spin hypothesis is more linked to the role of the press in generating information about a story’s importance or accuracy. Media coverage of a story is likely to increase its credibility or perceived importance with investors, which companies may wish to take advantage of by selectively promoting their good news. The most likely benefit for companies is to temporarily increase share prices by affecting investor expectations. If investors use media reports when forming expectations of the company’s prospects, then more positive media coverage may cause investors to bid up the price. However, higher expectations cannot be sustained indefinitely without real effects at the level of company operations. As a consequence, media spin seems likely to result in eventual disappointment. The evidence in this paper indicates that IR firms are significantly involved in spinning their clients’ news stories, and moreover that this impacts stock prices. My main findings are twofold. First, I find significant evidence that IR firms generate greater media coverage of their clients’ good news relative to their bad news, consistent with the spin hypothesis. Second, I find that this positive media coverage increases returns around news announcements. However, it leads to subsequent lower returns around earnings announcements, where IR firms show no ability to generate disproportionately positive media coverage. I argue that the lower earnings announcement returns represent investor disappointment due to the effects of past spin.
I find that during 2002 to 2006, employing an IR firm is associated with an increase in media coverage on announcement days by 25.4% overall. Consistent with the spin hypothesis, the increase is 32.1% for press releases with positive headlines, but only 18.8% for press releases with neutral or negative headlines. This good news/ bad news disparity in the IR firm effect exists only in non-earnings announcements, and is not evident in earnings news. This is consistent with non-earnings announcements being easier to spin. Relative to earnings, non-earnings news is less anticipated (so fewer journalists will be aware of it without IR influence) and likely to contain more soft information (allowing IR firms to push a particular interpretation of ambiguous news events). I also find evidence that IR firms affect investor expectations and stock returns. On non-earnings press release days (when the IR firm can spin the news), IR firm clients have significantly higher characteristic-adjusted returns by 11.1 basis points, after controlling for a large number of other factors. On earnings announcement days (when the IR firm cannot spin the news), IR firm clients lower returns by 33.5 basis points. When the earnings news is negative, the effect is even stronger - the reaction to a given level of negative earnings news is around 67% larger for companies using an IR firm. Moreover, the lower earnings announcement returns appear to be a direct consequence of investor disappointment due to past spin. Earnings returns are significantly more negative if there were higher returns since the previous earnings announcement, and after greater media coverage of positive press releases.
One of the challenges of this paper is to show that the results above are causal, and not driven by unobserved characteristics of companies who hire an IR firm. I address this in several ways. For returns, I examine connections between IR firms and reporters at newspapers, based on reporters who wrote about multiple clients of the IR firm. Turnover among connected reporters should reduce the effectiveness of IR firms in spinning the news. However, it is exogenous to company characteristics, because reporters leaving newspapers seems largely unrelated to which companies they wrote about. I show that connected reported turnover predicts lower returns around non-earnings announcements and higher returns around earnings announcements – that is, it weakens the IR firm effects on announcement returns. This is strong evidence that the patterns in returns are driven by the ability of IR firms to generate media coverage. Moreover, IR firms that lack any connections to reporters show very little ability to influence returns in the first place. The IR firm effect on earnings announcement returns is roughly four times as large for IR firms with some past journalist connections (18 basis points for clients of unconnected IR firms vs. 70 basis points for connected IR firms). For non-earnings announcements, the effect of unconnected IR firms is less than 1 basis point, compared with 22 basis points for connected IR firms.
The effects on media coverage also appear to be causal. IR firms can spin the news more in newspapers where we would expect them to have more influence – papers that are geographically close, and papers that are historically susceptible to IR firm influence. IR firms increase positive news coverage by about 3 times more in newspapers in the same state as the IR firm (after controlling for whether the company is in the same state as the newspaper). Further, when a company adds an IR firm, its positive coverage goes up more in papers that were more susceptible to IR firm influence in the previous year. I also find that that IR firm use is more common for companies with greater incentives to increase share prices in the short term. A higher proportion of CEO pay in stock and option compensation predicts a higher probability of using an IR firm. IR firm clients also engage in other types of manipulative behavior - they are around 3% more likely to restate their earnings in a given year. IR firm clients are also more likely to selectively time their news announcements by releasing positive press releases from Monday to Thursday, when investor attention is higher (DellaVigna and Pollet (2008). These suggest companies that are more interested in pushing up prices in the short term.
The predictable differences in announcement returns also create the potential for profitable trading strategies. I consider a strategy that around earnings announcements buys companies that don‟t use IR firms and shorts companies that use IR firms. Holding stocks for two days produces an alpha of 19.8 b.p. per day or around 50% per year, while holding stocks for 21 days lowers the alpha to 2.8 b.p. per day, or around 7% per year. The fact that very high turnover is required to capture the large differences in returns suggests that transaction costs may partly explain why the mispricing is not eliminated. During a two day window, IR firm clients have a negative earnings announcement premium of around -13.3 b.p. This provides evidence that investors are actually disappointed after the spin.

Great stuff! The complete paper Selective Publicity and Stock Prices can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1540309

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Hello! #irclass

Alexander Laskin (@AlexanderLaskin), an assistant professor at Quinnipiac University, is teaching an introductory investor relations class and using Twitter as one of the venues students will be discussing issues facing the profession today. They are using the Twitter hashtag #irclass. I’ve been reading some of the tweets and a couple of the students’ blog posts, and I’m excited that at least a couple of students have chosen to focus on investor relations and the web, an area that I obviously find interesting.

Student John Greenlaw (@jagreenlaw) has started a blog on Investor Relations & New Media and has reviewed Apple Inc.’s use of the web for IR, a poor model to study, unfortunately. (John, compare Apple to Intel or Microsoft or IBM and you’ll see why.) And Sarah Beyel (@SBeyel_IR) has decided to focus on Investor Relations and Facebook, which she is covering on her IR Blog, a subject I’m deeply interested in and have written about here.

There are quite a few practicing IROs and IR counselors on Twitter who could be good resources for students (see this list by @serena). I’m @irwebreport and am happy to help where I can.

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Track.com -- another new service aggregating independent investment research

Track.com is the global marketplace for research ideas. It is a place where qualified contributors can share their stock, commodity and macro ideas with a unique group of institutional investors, high net worth individuals and other thoughtful market participants.

We are an independent platform for investment research and market ideas. Our content is submitted by highly qualified professionals with proven track records and a developed understanding of what is required to produce thoughtful research. We offer our contributors a unique distribution channel to a growing base of institutional money managers in search of top-quality, real-time research, as well as the general public. We provide filtering, messaging and alerting tools so that our readers can access what they want as soon as it is available to them.

Our management team has over seventy years of experience in financial services at top tier firms.

via track.com

It has an impressive management team. It costs $499 per month for real-time access, $99 for access on a 3-day delay, or it’s free for 7-day delayed access to articles.

We’re seeing more of these types of services emerging, and increasingly they’re trying to cross over from serving only institutions to serving a retail audience as well.

I’m not sure anyone has yet hit on the right business model or editorial mix, but it’s great too see people with strong Wall Street pedigrees trying new things.

Still, I can’t help thinking that the boys should lose the neckties. ;-)

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If you can't organize a tweet...

I’m seeing a lot of outright chaos in the corporate Twittersphere. Here’s a very recent example involving Yahoo!, which just released their financial results about an hour ago. If you had gone to their IR homepage in the past year or so, you’d have seen a prominent link directing you to follow their corporate blog. Here’s the page:

screenshot
If you clicked on “Visit Our Corporate Blog,” you’d have been directed to this page, which has a fairly prominent link to the company’s Twitter account at http://twitter.com/yahoo screenshot

Given that the blog is so prominently linked to the Yahoo! IR homepage, I’d argue it’s reasonable to expect investors who use Twitter to follow Yahoo!’s twitter account. And I think it’s reasonable for them to expect that the company will tweet important company news like earnings releases. But more than an hour after the results were released, Yahoo!’s Twitter account still makes no mention of the earnings release.

screenshot What makes it even worse for me is that earlier in the day, Yahoo! tweeted about an i*mportant event at another company*. See the circled tweet about GM selling Saab.

I don’t get it. And I’m left wondering what in the world is going on at Yahoo! Sure, it’s a big company and there is lots going on. But something like the company’s financial results? How hard can it be to make sure the folks staffing the company’s main corporate Twitter account are in the loop. Funny enough, the people staffing the Yahoo! Germany account got the memo. See here http://twitter.com/yahoode

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Wikinvest is bigger than Merrill Lynch

via marketingcharts.com

Another data point for your “IR and Social Media” presentation.

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What are public companies tweeting about? Check out IR_tweets

We are currently tracking over 600 stock exchange-listed companies with accounts on the Twitter microblogging service, and we continue to add more almost every day. Together these companies are pushing out hundreds messages per day. You can view all of them in our public companies 1 and public companies 2 lists, which are the most followed lists of their kind on Twitter.

Most of the public company tweeting relates to marketing, customer service or public relations. Right now, though, there’s increased IR-related activity because earnings season is underway, but there’s still a lot of chaff and not much wheat. As a service to interested IR pros, I’ve started a separate IR_tweets account that aggregates only IR-related tweets picked out from the hundreds of general interest tweets companies are posting. The IR_Tweets account will save you a lot of time and give you some ideas for what to do — and what to avoid — with your own IR tweets.

If you see a tweet that interests you, it’s a good idea to check out the company’s Twitter account to see the message in context. For example, if a company live tweets an event, we’ll include three or four tweets from the session just to give you a flavor for the event, but you should check out the company’s account to see them all. Since I set this up just a few hours ago, only a few tweets are showing in the new IR_tweets account, but please do take a look and let me know what you think.

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Sun is shining. Weather is sweet. Makes me wanna go for a walk

We don’t get too many days like this here in Google Earth’s capital at this time of year. I’m out walking and contemplating how on another island in another ocean people are living through hell on Earth. Makes me feel very insignificant.

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Google Figures Out Another Use For YouTube: Earnings Webcasts

If you’ve ever tried to listen in on a Google earnings call on the web, it’s kind of a pain. That’s especially true if you use a Mac because Google insist that you use either Real Player (which is awful on the Mac) or Windows Media Player (which doesn’t work on a Mac). Of course, you could always call into an actual phone number, but who does that anymore? Thankfully, for its Q4 2009 earnings being announced this afternoon, Google has made things easier.

Gone are the options to listen via Real Player or Windows Media Player. Instead, you have one option: Webcast on YouTube. Google has set up a YouTube account, GoogleIR (investor relations) that will host the earnings call and the follow-up Q&A session. All you need is a web browser with Flash installed to listen in.

via techcrunch.com

It’s an indictment on the IR technology vendors that people have had to endure usability problems with webcasts for so long.

Google used to use Shareholder.com, which only supports Real Player and WMP (and apparently Quicktime on occasion). Thomson Reuters has begun supporting Flash in North America, about two years after doing so in Europe.

So YouTube streaming any better? Yes and no. Yes, you don’t need Real Player or WMP, just Flash.

And no, because you still can’t listen to the webcast on an iPhone.

The good news is that YouTube is testing HTML5 for multimedia, which is supported by the Safari browser that comes installed on the iPhone.

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A better live-tweeting approach for earnings calls -- #eBayQ409 meet $EBAY

I’ve never been a big fan of companies live tweeting their own earnings calls for investor relations purposes. The company-generated tweets do little more than regurgitate bite-sized chunks of information that can just as easily be consumed as a full meal by listening to the live webcast. That said, I do think there is value in companies aggregating and giving prominence to what people outside the company have to say about their earnings results and their conference call discussions.

I’d like to see earnings call providers like Thomson Reuters and Shareholder.com offer companies the ability to embed a tagged Twitter stream in the live webcast player. Doing so will let investors listening the webcast see what other investors are saying about the company’s results and outlook. For retail investors, having access to many different viewpoints is much better than getting only the company’s version. And the prospect of having your tweets show up in front of the webcast audience will likely attract more people to participate in earnings calls, both of a high quality and probably also an undesirable element. But there are ways to filter out the crap.

During eBay’s earnings call this afternoon, I tried to cross-post between two streams of tweets that were happening in isolation from one another. The first was the company’s #ebayQ409 stream and the second was the StockTwits $EBAY stream.

The result looks like this, which I think is more informative and less sterile (screenshot of part of the activity is below). Will companies do this? Probably not. There’s no SEC rule that prevents them doing it and the SEC has said they’re not liable for what others say.

But companies still want to control what investors see, and adding a Twitter stream forces them to give up some control. However, companies with the guts to try it will probably earn a lot of credibility brownie points with investors and attract more attention to their stories.

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