Is There a Better Investor Relations Model in the Age of Social Media?

20 April 2015

By Ezra Marbach

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This post comes courtesy of guest contributor Ezra Marbach. This post first appeared on his blog, Finance 2.0

If you’re an investor you demand many things. Most important, you expect substantive, timely information, transparency, and access to management. But few public companies deliver on this.

The obvious exception is Netflix (NFLX).

This was apparent yet again last week when the company announced Q4 earnings results. Netflix is typically one of the first companies to report quarterly results each earnings season.

And this doesn’t go unnoticed among interested investors. Prominent VC Bill Gurley said the following on Twitter last week: “Congrats to @netflix on great quarter, but also for reporting 15 days after end of Q. Signals a tight finance operation. $NFLX

Investors want information. And they want it fast. Netflix delivers. And, as you can see from past dates of earnings releases the company reports earlier and earlier quarter after quarter.

This is a remarkable achievement. And investors have rewarded them for it

Next comes access, transparency, and substantive, actionable information.

Prior to earnings calls, Netflix solicits investor questions in a press release. Questions submitted via email are considered for the company’s Q&A.

Unlike other public companies (ex Yahoo!), Netflix’s management provides greater access by going on camera to discuss results.

On their video webcast, management eschews prepared remarks, disclosure language, and safe harbor statements (saving investors’ time). Instead, they head straight to questions.

Questions are posed by two sell-side analysts. There are rarely any softball questions. And when Netflix CEO Reed Hastings wants fellow executives to provide more information he has a tendency to take over the questioning. This quarter was no different (see question on Poland).

And as you can see, Netflix’s live video webcast attracts a solid following.

Netflix takes other steps to enhance their earnings experience. They provide a shareholder letter prior to their call that provides extensive information on the quarter. A number of analyst questions are derived directly from comments made in the letter. This provides for more substantive discussion during the Q&A interview.

Netflix also provides a transcript of their call not much after its conclusion. While there are many earnings call transcripts available on the Internet investors know that the most reliable will always come from the company itself.

Additionally, the company’s IR website also provides a substantial amount of actionable investor content including

(1) Top Investor Questions

(2) Long Term View

Finally, Netflix has a significant presence on social media.

(1) The Netflix Investor Relations YouTube Page

(2) The Netflix Blog

(3) The Netflix Tech Blog

(4) The Netflix Facebook Page

(5) The Netflix Twitter Feed

(6) Reed Hastings’ Public Facebook Page

(7) StockTwits

This is exactly where investors spend their time researching stocks. No doubt management is aware of this. They also acknowledge the possibility they will disclose material information using these channels.

CONCLUSION

In sum, Netflix goes above and beyond to cater to investor needs. And they’ve been rewarded for it.

One would expect other public companies to apply the Netflix model because much of the innovation Netflix has brought to earnings days comes at little to no additional cost.

Sadly for investors this has yet to happen.

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froleprotrem

9 months ago

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