NEW YORK: Goldman Sachs’ plan to snub Business Wire in favor of using Twitter to announce earnings does not signify the death of newswire services. In fact, IR pros say forgoing press release distributors could be detrimental to smaller companies.
The Wall Street firm’s decision to disseminate its quarterly earnings statement next week through its website and Twitter follows the hacking of press release distributors Business Wire, Marketwired, and PR Newswire. In the elaborate scheme, hackers and traders gained access to statements on not-yet-public mergers and acquisitions via wire services in an effort to trade on the insider information.
Since news of the hack broke this summer, Brian Schaffer, head of transaction services at Prosek Partners, told PRWeek that a number of his clients have been concerned about whether or not to use their own platforms as a disclosure source. Aside from two large clients, he has advised companies to stick with wire services for earnings releases.
"This kind of thing may work for clients with a large market cap, who have a large enough retail and institutional following, and have already been using the IR portion of their website for news dissemination beyond just the basic stuff," said Schaffer.
Jeffrey Goldberger, managing partner at KCSA Strategic Communications, concurred and added that "leaders in the industry can do what they choose." He referred to Goldman as a bellwether for the financial services industry, and said audiences will flock to find its earnings information, no matter how the firm makes it public.
He warned, however, that one size does not fit all for this type of IR strategy.
"My concern would be that smaller companies that struggle for eyeballs and struggle to gain the interest of both retail and institutional investors might follow suit and fall flat," Goldberger said. "They might expect that people are going to follow them in the same manner as they would follow Goldman, and I just don’t think that would be the case."
Small companies, Schaffer added, should not use their own platforms to announce earnings because they do not have the traffic. Even if they issue a release explaining where the information can be found, that does not guarantee people will click.
"If you are a smaller company, the best way to get your news out there is to use a wire service," he said. "That gives you the broadest reach possible."
Even for larger companies, announcing earnings via Twitter can have drawbacks, such as the site’s posting limitations, said Goldberger.
"Is 140 characters enough space for messaging to come through effectively? And are there potential gaps that might come through that cause more issues?" he said.
Announcing earnings on social media sites such as Twitter and Facebook has only been allowed by the Securities and Exchange Commission since 2013. The rules simply stipulate that investors must be alerted beforehand about what social media sites will be used to disseminate such information.
More and more news is breaking on Twitter, noted Vested president Binna Kim. She added that Twitter’s Moments feature, which launched this week, is a sign more people are using the site as a news curation tool.
"I wouldn’t be surprised if we start to see more companies using Twitter as a news distribution tool," said Kim. "What Goldman is doing is a sign of some of the issues Business Wire has had recently, but also embracing social media as a valuable and important communications function."
In terms of whether Twitter is a more secure comms platform than newswire services, Goldberger said no one is immune from cybersecurity and a hack is "no reason to throw the baby out with the bathwater."
Overall, he said, newswire services are "very secure."
"Will there be nuances and changes in technology? Sure, and we have already seen them," said Goldberger. "But I don’t think the newswire is going to be a dying breed."
A representative from Goldman was not immediately available for comment.