By Dominic Jones
IT’S a question many publicly traded corporations around the world need to answer as investment blogs become more sophisticated and attract greater interest from investors.
When a company finds itself the subject of an investment blogger, how should it respond? Indeed, should it respond at all?
One company already has its answer. On Tuesday, Chris Boswell, CFO of development-stage drilling technology company Particle Drilling Technologies, Inc (Nasdaq: PDRT) responded to an analysis of his company by David Phillips, publisher of the 10Q Detective blog.
A day earlier, Phillips had published a particularly detailed analysis (for a blog) of Particle Drilling Technologies in which he concluded that “investing monies in Particle Drilling is no better than throwing your dollars down a sinkhole.”
Phillip’s blog post was fed through the SeekingAlpha investment blog aggregator to Yahoo! Finance, where it was exposed to that site’s large audience.
In his response to the post, which appeared on Yahoo! Finance yesterday, the CFO said he needed to “point out that some of your valuation metrics are in conflict with our public disclosures.”
He took particular issue with Phillips’ growth projections for the company, pointing investors to estimates in the company’s investor presentation which say it has a potential $1 billion market.
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| Both the CFO’s response and the original blog post appeared on the company’s Yahoo! Finance profile page. |
“Blogger Relations” to be routine for IROs
The exchange between the CFO and the blog is interesting in that it is one of the few times that a company has responded directly to a blog post.
And all indications are that it won’t be the last time that companies will be interacting with bloggers. Increasingly, I expect that “blogger relations” will become a fact of life for many IR departments.
This is simply because the quality of investment blogs is improving in lockstep with their access to huge potential audiences through mainstream websites like Yahoo! Finance, Google Finance and AOL Money & Finance.
As the quality of information and analysis on investment blogs improves, investors are bound to take them more seriously. And when someone has influence with investors, IR departments take notice.
Blogs more credible than message boards
Although many companies have policies against employees commenting in stock message boards, they should not take the same position when it comes to blogs.
Due to their anonymous nature, message boards typically lack credibility and no right-thinking investor should take anything in these forums seriously. That’s the official position of investor protection agencies.
But most investment blogs are different because they are published by indentifiable and hence accountable individuals. In the case of blogs distributed via SeekingAlpha, the bloggers are vetted and must abide by specific disclosure rules.
This gives bloggers more legitimacy than posters in forums. Of course, the credibility of individual bloggers varies based on their expertise and the quality of the information they post.
Develop policies for interacting with blogs
IR departments should develop policies and procedures for monitoring and interacting with investment blogs. They shouldn’t go overboard doing this, but it is definitely something they need to address.
My experience, however, is that most IROs are blindly dismissive of blogs. This is unfortunate because blogs are both an opportunity and a threat. They are a threat to bad companies and an opportunity for good companies to spread their story.
I’m inclined to write more on this subject in future articles if the need exists. If you have any questions or comments, feel free to put them in an email to me or you can use the comment form below. I’ll use your questions and comments to inform future articles on the subject.
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