More and more companies are utilising social media such as Twitter, Facebook and Instagram for their corporate communication. However, social media are not yet recognized as an information channel for mandatory publications. Nevertheless, their use can be quite beneficial in financial communication which was recently demonstrated by Netflix. After an optimistic Facebook post and a profit announcement, the Netflix share price rose by around 15 percent. Also on his Facebook page, the CEO reported on the increased number of subscribers. In the same post he expressed confidence that the number of subscribers would continue to increase with the launch of two new series. This prompted the SEC to look into social media as a means for capital market communication. As early as 2013, the US authority made it possible to use social media for capital market communication and defined a legal framework for doing so. In the USA, unlike in Germany, disclosure obligations are not linked to specific communication channels. In the SEC’s view, compliance with disclosure requirements is reached if the information is accessible to the general public and does not exclude anyone.

In Germany, social media may only be used for voluntary disclosures, as they do not meet all the requirements of the German Securities Trading Notification Ordinance (WpAV). It is not clear whether this will change in the foreseeable future. Despite the current lack of recognition of social media as a channel for mandatory publications, companies should include them in their communication with the financial market. Social media simultaneously reach a large number of people around the world. Information can be disseminated more quickly and investor relations can be strengthened. Moreover, Twitter & Co. can facilitate direct contact with companies as their audiences also increasingly use social media.

Studies show that communication via social media increases the efficiency of the capital market. The more information that is processed in share prices, the lower the risk of individual investors being subject to an information gap. Lower information asymmetries mean that liquidity providers reduce their bid/ask spreads. All market participants then benefit from lower transaction costs. An empirical study already confirmed this correlation in 2014 – for technology companies with active Twitter accounts that send out links. However, the links did not provide new information, but news already published via traditional media. Nevertheless, a reduction in the bid/ask spread in relation to the company’s share price was observed.