SEC clears social media for announcements
Social media took something of a leap today as the Securities and Exchange Commission said companies can indeed use such avenues for corporate announcements.
The proviso is that investors have to be told in advance where the disclosure will be made.
The SEC said in a report that companies can use media such as Facebook and Twitter “to announce key information” and stay within the bounds of fair disclosure rules.
“The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites,” the regulator said in a statement.
“The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been aware that’s where to look for it,” it added.
“Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.”
The SEC’s rule of thumb is that some shareholders can’t get “a jump” on others via selective disclosure of material information. Traditionally, companies announce major developments through news releases and on their websites.
What the SEC is saying is that Facebook and Twitter are fine as long as everyone knows that’s where it’s going to be. If investors aren’t told in advance, it’s not likely to fly.
“Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news,” said George Canellos, acting director of the group’s enforcement unit.
This was sparked by the CEO of Netflix, Reed Hastings, using his own Facebook page to announce in mid-2012 that views had topped one billion hours a month for the first time. The information was not disclosed elsewhere.
“Neither Hastings nor Netflix had previously used his Facebook page to announce company metrics, and they had never before taken steps to alert investors that Hastings’ personal Facebook page might be used as a medium for communicating information about Netflix,” the SEC said.
“Netflix’s stock price had begun rising before the posting, and increased from $70.45 at the time of the Facebook post to $81.72 at the close of the following trading day,” it added.
“The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix. Recognizing that there has been market uncertainty about the application of Regulation FD to social media, the SEC issued the report of investigation pursuant to Section 21(a) of the Securities Exchange Act of 1934.”
RIM case dismissed
A U.S. District Court judge has dismissed a class-action suit against Research In Motion Ltd. and three executives, but his comments are biting where the BlackBerry maker’s infamous fall from grace is concerned.
U.S. District Judge Richard Sullivan of New York dismissed the suit, which alleged those involved knew or ought to have known what would come, last Thursday.
Robert Shemian, at the time a RIM shareholder, was the lead plaintiff in the case against RIM, former co-CEOs Jim Balsillie and Mike Lazaridis, and current CFO Brian Bidulka.
According to the judge’s summation of the case, Mr. Shemian alleged that they “engaged in a scheme to obscure the company’s faltering market position as growing competition rapidly outpaced RIM’s aging product line,” hurting those who bought RIM shares between mid-December, 2010, and mid-June, 2011.
Those competitors included Apple Inc.’s iPhone and Google Inc.’s Android system. RIM failed to keep pace, sparking stock downgrades by analysts and a “markedly depressed stock value,” according to the document.
RIM had been at the top of its game in the winter of 2010, boasting revenue gains of 40 per cent and a 58-per-cent jump in earnings per share.
At the same time, the Waterloo, Ont.-based company “stated that its finance outlook was sound” as it prepared to launch what was then a new QNX operating system and its PlayBook tablet.
RIM’s decline from there on in is well documented, leading to what the suit said were product delays and a rush to market a lagging tablet.
RIM should have seen its later decline as “foreseeable,” and thus was honour-bound to disclose that. Instead, the suit alleged, the company projected future gains.
The allegations ran through several corporate comments and spoke of 11 “low-level confidential informants to loosely establish that a general atmosphere of delay and lacklustre delivery existed at RIM,” the judge noted.
The judge tossed out the arguments for several reasons, noting that investors were “provided with substantial warnings” about RIM’s potential pitfalls and that some of its statements were “too vague to be considered misleading.” Rather, they were “non-actionable corporate puffery.”
RIM certainly won the day where the suit is concerned, as the judge dismissed it “with prejudice.” But some of his comments are telling, including his finding that RIM didn’t keep up with its rivals.
“As a consequence, defendants have paid a price for their mistakes by way of demotions, terminations, and sizable financial setbacks,” he wrote.
“Nevertheless, corporate failings alone do not give rise to a securities fraud claim,” he added.
“Here, the facts alleged by plaintiff support a finding of corporate mismanagement, not misfeasance.”
RIM, of course, is now basking in the glow of a new BlackBerry 10 operating system and far better-than-expected fourth-quarter financial results.
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- In motion: Jim Balsillie’s life after RIM
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SocGen sees gold price sinking
Admitting its view is “considerably more bearish” than those of others, Société Générale projects the price of gold will plunge by 15 per cent by the end of this year.
The comment from the bank's foreign exchange group came as the price for June delivery slipped more than 1 per cent today, to below $1,600 (U.S.) an ounce.
“Specifically, we forecast that gold prices will average $1,500/ounce over the course of 2013 and will gradually drop to $1,375/ounce by the end of the year,” Sébastien Galy of the Société Générale foreign exchange team said today.
“The 15-per-cent fall is quite dramatic especially compared to the Bloomberg consensus forecast of $1,752/ounce by the end of 2013,” he said in a research note.
“The gold price is, in our view, in bubble territory. Investors have pushed the gold price sharply higher over the past 10 years with the past five-year rally driven by fears that aggressive central bank [quantitative easing] would lead to very high inflation.”
But inflation has remained tame, and here’s what Mr. Galy believes we’re starting to see:
1. Economic conditions “that would justify” the Federal Reserve ending its asset-buying QE program.
2. “Fiscal stabilization that has passed its inflection point.”
3. The U.S. dollar is starting to trend up.
“It seems unlikely that investors would want to add much to their long gold positions in this context,” Mr. Galy said.
“If so, the gold price would trend lower at pace as the physical gold market is seriously oversupplied without continued large-scale investor buying,” he added.
“Selling by investors would add fuel to the fire. Our central scenario calls for a gentle bear market over the next several years.”
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TransCanada seeks commitments
TransCanada Corp. is forging ahead on its proposal to ship western crude to the east coast, asking potential shippers today for firm commitments, The Globe and Mail's Shawn McCarthy reports.
If the so-called open-season process succeeds, the company said, it will then seek regulatory approval with the aim of getting it done by late 2017.
Many politicians want the pipeline built as means to get western crude to Canadian refineries in the east that depend on imported oil.
- TransCanada seeks commitments for project to pipe oil to Quebec, N.B.
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Consumers pull back
Canadian consumers continue to pull back on their hefty borrowing, at the same time as corporate finance is surging.
Household debt climbed 4.5 per cent in February from the same month a year earlier, Royal Bank of Canada calculated today, marking the slowest annual pace since June, 2001.
That's overall debt. Credit card, personal loan, lines of credit and other non-mortgage debt rose by 2.5 per cent, the slowest since July, 1993.
At the same time said RBC economist David Onyett-Jefferies, corporate financing surged 7.9 per cent, the fast pace in five years.
Leech to retire
The head of one of Canada's biggest pension fund managers is retiring by the end of the year, though Jim Leech says a search for his successor has been under way for a while, The Globe and Mail's Janet McFarland reports.
Mr. Leech said he told the board of the Ontario Teachers' Pension Plan of his plans, and that a successor is expected to be chosen before he leaves in December.
Kuroda reiterates pledge
The new governor of the Bank of Japan continues to ramp up the hype surrounding his first meeting this week.
Haruhiko Kuroda is promising forceful action to bring Japan out of its slump, repeating today that he will be aggressive in trying to meet the central bank’s new inflation target of 2 per cent.
“It is not easy to beat deflation, which has continued in Japan for 15 years,” he told a parliamentary committee, according to Reuters.
“But the BoJ will use all options available and do whatever it takes to show markets its strong commitment.”
Prime Minister Shinzo Abe came to power on a pledge of economic action, and will no doubt be watching the Bank of Japan meeting closely.
It begins tomorrow, with a policy decision Thursday.
Unemployment high in Europe
Unemployment remains stubbornly high in some of Europe’s more troubled countries.
The jobless rate in the 17-member euro zone was 12 per cent in February, according to the Eurostat statistics agency today, refusing to budge from January’s level.
In the wider, 27-member European Union, unemployment included up to 10.9 per cent.
There are now almost 26.5 million people without work in the EU, more than 19 million of them in the smaller monetary union.
The differences across the region are striking. Greece, Spain and Portugal, for example, are struggling with jobless levels of 26.4 per cent, 26.3 per cent and 17.5 per cent, respectively, while Austria and Germany are much lower at 4.8 per cent and 5.4 per cent.
Youth unemployment is particularly ugly, at 58.4 per cent in Greece and 55.7 per cent in Spain.
Whisky in the jar
Some interesting tidbits from the Scotch Whisky Association in Edinburgh today:
1. Export volumes slipped last year, but overall value rose 1 per cent to £4.3-billion (up 87 per cent in the past decade).
2. “Scotch Whisky is now worth £135 a second to the U.K. balance of trade.”
3. Sales fell in southern Europe, naturally, but exports to other regions outpaced that. “The French market was distorted by excise tax increases in 2012 which led to a ‘stocking up’ of Scotch whisky in 2011 before their introduction.”
4. The U.S. market is tops, with exports last year of £758-million. “Demand from the USA is expected to increase as consumer confidence grows and many people trade up to premium brands.”
5. Direct exports to Latvia rose 48 per cent, to Estonia 28 per cent.
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