Netflix (NFLX) says it might make company disclosures on social networks, which could irk some investors even though such action has an SEC stamp of approval.
The movie-streaming company submitted regulatory paperwork late Wednesday saying it might disclose material information on its Twitter and Facebook (FB) accounts, as well as the public Facebook account of Netflix CEO Reed Hastings.
Netflix appears to be the first company to react to the SEC's April 2 guidance that said companies could under fair-disclosure laws post "key information" on social networks, provided they first tell investors where to look.
With its new filing, Netflix is telling investors where to look, including two corporate blogs besides the Twitter and two Facebook accounts.
Key questions are unanswered, such as whether Netflix might ever disclose key information solely on one — or all — the social accounts.
But such disclosures could irk some investors who don't want to log in to Facebook or Twitter every few hours to see if companies have posted news, says Wedbush analyst Michael Pachter.
"I think the SEC completely blew it and the SEC ruling reflects how little the guys who write the rules use social media," Pachter told IBD. "Facebook itself doesn't even disclose financial information on Facebook.
Most public companies primarily have used the investor relations sections of their corporate websites to post key, or material, information, such as quarterly results, press releases and SEC filings. Now, some of that information could show up in 140-character Twitter posts. Netflix has updated its investor relations Web page with links to its social accounts, and to the Hastings account.
"The SEC is essentially taking the position that social media is no different than any other kind of advanced technological communication," said Julia Vax, a partner at law firm Arnold & Porter in San Francisco. "The SEC obviously is trying to keep up with technology.
In 2008, SEC officials first approved information posted to a company's website as a sufficient way to disclose key information. This is a continuation of those regulations, Vax says.
Netflix doesn't say it definitely will start posting material information to social media, only that it might. Netflix didn't respond to requests for comment.
"It is possible that the information we post on social media could be deemed to be material information," Netflix Chief Financial Officer David Wells wrote in the filing.
Investors seemed unworried. Netflix shares jumped 4.2% Thursday.
Hastings Spurred The SEC Netflix's Hastings spurred the review that led to SEC's April 2 guidance. In July 2012, Hastings had posted to his Facebook account a message that Netflix streaming had topped 1 billion hours monthly for the first time. Thursday, his account, with 264,000 followers, said streaming hours had topped 4 billion the last three months.
The 2012 disclosure sent the movie-streaming service's shares up "from $70.45 at the time of the Facebook post to $81.72 at the close of the following trading day," the SEC says.
In December, Hastings and Netflix received "Wells Notice" letters from the SEC, indicating enforcement might be pending. In the end, the SEC didn't take action against Netflix or Hastings.
Stocks can move quickly on little news, so the new rules could leave some investors in the dark, Pachter says.
Facebook posts can only be seen on the Facebook network. Those posts can't be collected by an RSS reader — a digital-collection tool many stock-watchers use to follow company information. So, a stock could start moving on news posted on Facebook before some investors are aware it was released, Pachter says.
SEC officials, though, said posts on Twitter and Facebook are "perfectly suitable," if not made on a restricted network.
Observers speculate that Netflix might just be covering itself in case investors react to future social media posts.
But Netflix has opened the door. A flood of companies could make similar filings, Vax says.