The Internet has become a more influential source of investor information and chat room discussions can impact share price, according to a recent survey of more than 120 public companies.
The survey, conducted by public relations firm Fleishman-Hillard Inc., reported that the majority of respondents (84 per cent) believe the Internet has become a more influential source of investor information and almost two-thirds (60 per cent) hold the view that Internet chats and rumors can have an impact on share price. Only 20 per cent could confirm that the company had a communications plan currently in place that addressed or included strategies dealing with the Internet.
Anne Lachance, senior vice-president and partner of Fleishman-Hillard’s Canadian financial communications practice, said the results show that perceptions and understanding of public companies can be substantially broadened through effective Internet communications.
Participants also revealed that the Internet has changed the way in which information has been traditionally disclosed, and over ten per cent reported that material non-public company news had been broken over the Internet prior to being officially released to the market, the survey reported.
Rossa O’Reilly, past chair of the Association for Investment Management and Research
(AIMR) Board of Governors and managing director of CIBC World Markets in
Toronto, said the Internet is revolutionizing corporate disclosure by giving public companies an inexpensive means to disseminate large amounts of information instantly to all investors at the same time.
The only potential adverse consequence of the Internet on corporate disclosure is the possibility that some companies could elect to confine virtually all of their investor relations to this medium, O’Reilly said. Regulation in the United States is pushing some companies in this direction, she added. However, if used wisely, the Internet can greatly boost the volume, timeliness and fairness of corporate disclosure, O’Reilly concluded.
Other key company survey findings included:
– About three-fourths (73 per cent) have been the subject of third party Internet chats or postings,
– One-third (34 per cent) confirmed an investment professional or analyst has asked them about information or rumors related to their company on the Internet,
– More than half (52 per cent) did not have a written crisis communications strategy.
The survey, designed to determine the best practices in Web-based financial communications, consisted of over 50 questions covering crisis communications, Internet monitoring, chat rooms and message boards, materiality and disclosure, and the influence of Internet communications on share price and volume, among other topics. Of the 122 companies surveyed, 62 per cent had headquarters in Canada, 31 per cent in the United States and the remaining 7 percent from outside of North America. The companies surveyed represented a wide range of industries, such as technology and telecommunications (30 per cent), metals and mining (eight per cent), pharmaceuticals (seven per cent), and consumer goods (six per cent), Fleishman-Hillard said.
An Analysis of Trends and use of Technology in Investor Relations, a recent survey by the National Investor Relations Institute (NIRI) in December 2000 found that using the Internet has become standard operating procedure for investor relations officers (IROs). The Canadian Investor Relations Institute (CIRI) recommends a company’s practice regarding chat rooms should be consistent with its policy on dealing with rumors in general
Fleishman-Hillard can be reached at http://www.fleishman.com.