The Social Activists
Social media can destroy reputations, lead to product boycotts and send a company’s stock price into freefall. Now, corporations worldwide are waking up to the fact that they could also find themselves under fire online from activist investors who have ousted embattled CEOs, overthrown boards and forced changes in well-entrenched business models.
With corporate activism on the rise, companies are realising they may have a yawning gap in their defences; it has become essential that they understand the growing impact of social media — such as Facebook, Twitter, LinkedIn and YouTube, as well as the rapidly multiplying number of investment community websites — in order to devise strategies for responding effectively once they find themselves in the firing line. One panellist at the IR Society summer conference this month told how his firm had used LinkedIn groups to source users of a company’s product in order to gauge customer satisfaction.
“Most investors still opt for the tried-and-tested route of a spot on CNBC or Bloomberg when the oxygen of publicity is required”
Social media has already become a key component of securities markets, according to Charlie Palmer, Senior Managing Director in Strategic Communications in the London office of FTI, who notes that Bloomberg includes Twitter in its feed of potentially market-moving news. “Activist shareholders increasingly use social media to break market-moving news. Carl Icahn’s Tweet about a meeting with Tim Cook of Apple added around $17bn to Apple’s market cap,” he says. Activism is comparable to hostile M&A and is delivering the kinds of superior returns that make investors sit up and take note, but issuers are behind the curve. “Companies are often not prepared to deal with activists and their initial response, which is critical, is poorly thought through often leading to an escalation of the situation,” he adds.
There is now every indication that companies can increasingly expect such fights to protect their reputations. A recent survey by Activist Insight and FTI Consulting confirms that online activism is on the march, with 67% of all respondents expecting use of social media to increase in the coming year. And there have already been enough wake-up calls to alert businesses to the dangers of being ill-prepared.
In August last year, long-time activist and billionaire investor Carl Icahn used Twitter and Facebook to repeatedly call for Apple to expand its stock buy-back programme. He backed off when the company went some way to meeting his demands; but more recently he has increased the intensity of his online activism at eBay, blogging furiously and inventing the hashtags, #notworldclass and #spinpaypalnow to promote a partial IPO of payments arm, PayPal.
Posted with permission from Activist Insight Ltd. Copyright ©2014. All rights reserved.