Megan Hjulfors, ARC Resources Ltd.
Social media is increasingly becoming the domain of hyper-public proxy battles, merger proposals and recapitalization schemes, as tech-savvy investors employ tactics formerly thought to belong to grassroots social activists, not deep-pocketed Wall Street influencers. Beyond its facility to amplify a message, social media has proven a powerful protest tool for its prowess in galvanizing supporters and organizing collective action.
The Iranian post-election protests in 2009 and Arab Spring in 2011 were some of the first events that put social media on the world’s radar as a mainstream activist tool. Today’s activist investors are well-trained communicators who know how to use social and traditional media to spread their message and gather public support.
Companies now find themselves waging battles with activist investors on social media, and more often than not companies are outpaced, as activists control the dialogue and dominate online sentiment. What lessons could industry learn from these socially engaged investors to not only level the playing field but circumvent future social media battles?
This article addresses key strategies employed by activist investors that should be noted by IR departments.
Banking on Emotional Capital
Even if an investor is not successful in an intended quest, be it a seat on the Board or share buybacks, the damage to a company’s reputation and stock price can be irreparable. Moving beyond the 1980s personae of ‘corporate raiders’, activists are positioning themselves as corporate watchdogs or ‘Robin Hoods’ who fight for the general good of the shareholder. Two narratives that are commonly employed are the ‘erosion of shareholder rights’ and ‘campaign for the people’.
In these narratives activists use highly emotional language to incite outrage and encourage action. Although intellectual arguments such as poor performance or loss of market share are combined with emotional attacks, it is the latter that make headlines. Accusations such as a failure of leadership, dysfunctional governance or lack of respect for shareholders are effective in rallying support on social media. In a world of 140 characters, emotion resonates better than reason or fact.
Perhaps the best example of the use of emotional capital is in an op-ed piece Carl Icahn penned for The Wall Street Journal during his very public battle with Dell. If taken out of context one might mistake it for a speech Robespierre delivered on the steps of the Bastille. Icahn questions the fairness of executive pay and laments what he calls the ‘divine right of Boards’. The piece concludes with the lines: "A lot of people die fighting tyranny. The least I can do is vote against it.”
Community Building through Dialogue and Collaboration
Companies proactive in social media diligently tweet news releases, post videos about their operations and set up Facebook pages. However, this communication is normally one-directional and rarely is successful in forming a truly engaged audience.
In his 2006 Yahoo campaign, activist investor Eric Jackson skillfully used social media to gather the support of 100 investors and ultimately oust Yahoo CEO Terry Semel. Jackson was not a big name powerhouse investor; in fact he owned a mere 96 shares of Yahoo. Through the use of his blog, YouTube videos and a Wiki (a web application that allows people to add, modify, or delete content in collaboration with others), Jackson made his case for a change to the strategic direction of Yahoo. His campaign centered on a Seven-Point Strategic Plan for the company. Jackson was humble in the presentation framing his fight as a sort of David versus Goliath narrative. Perhaps the most powerful and engaging aspect of his campaign was the focus on collaboration and crowdsourcing.
Jackson set up a Wiki where like-minded Yahoo investors could collaborate on the Seven-Point Plan, as well as a website where Yahoo shareholders could pledge shares. Ultimately, Jackson created an engaged community of shareholders who were personally invested in the fight – not as followers but as collaborators; elevating his case from one shareholder to a community of passionate shareholders.
Gold Plated Opinions and Billion Dollar Tweet
Investors such as Warren Buffet, George Soros and Carl Icahn have market-moving opinions. While in the past investors may have more discretely revealed their investment ideas, today they publicly post them on Twitter. This isn’t a case of seasoned investors going Millennial – it’s pure strategy. In August 2013, on the eve of a campaign to get Apple to buyback shares, Carl Icahn posted a tweet informing the world he had a large position in Apple and that he believed the company to be undervalued. The result was Apple shares moved from approximately $476 to $495 each in less than an hour – a whopping $17 billion increase.
It isn’t just the big names who can move markets in the blogosphere, either. Martin Shkreli made a name for himself as a short-seller using stock gossip websites, such as Seeking Alpha, to discredit companies he was shorting. What investors like Icahn and Shkreli understand is that sentiment affects stock and, whether moving masses with one tweet or building a dedicated following of investors, social media provides the opportunity for impact.
Lessons for IR
From these tech and communication savvy investors there are three main lessons.
The first lesson is that emotion goes further than reason or fact in the world of social sentiment. To combat this strategy companies need to present themselves as human, but not emotional. Find a way to clearly and transparently articulate your vision and strategy, while not coming across as defensive or out of touch with shareholder concerns. Video can be a great way to achieve this. Keep videos short, casual and, if possible, not overly scripted. You want people to see the strength and humanity of your leadership team.
The second lesson is that social media is about more than amplifying your message. It is about building an engaged community of followers. There is no question that it is much harder to connect people with a corporation than a David versus Goliath fight, but companies need to move beyond broadcasting messages and start figuring out how to foster engaged communities of online supporters. Don’t shy away from online dialogue about your company. Open your Facebook page to comments. Publicly respond to messages on Twitter. If people feel you are open and transparent in your communication and that they are part of the conversation, they will be much more likely to support you in battle.
Finally, Carl Icahn and Martin Shkreli teach us the power of a single tweet or blog post. As an IRO, your best chance in combating a Shkreli-style attack is to have a firm handle on the online chatter around your stock. Don’t engage in public bun fights, but be active and purposeful in your online communication and address issues head-on that may be trending in the blogosphere.
Megan Hjulfors is Investor Relations Advisor at ARC Resources Ltd. in Calgary.