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The U.S. Securities and Exchange Commission’s new guidance on social media allows corporations to deploy tools such as Twitter to their advantage in offerings, business combinations and proxy contests, a Wachtell, Lipton, Rosen & Katz partner wrote in a post published Wednesday on the Harvard Law School Forum on Corporate Governance and Financial Regulation.
Issued Monday, the SEC guidance in question allows companies to refer through a hyperlink to lengthy required legends, which are required before a company or shareholder is ready to release a final registration statement or proxy statement, explained Wachtell M&A partner Trevor Norwitz.
That, Norwitz notes, is an important change for companies wishing to use a social media platform like Twitter to communicate significant amount of information to investors in 140 or fewer characters .
At the same time, Norwitz explains, companies need to make sure that any hyperlink they use indicates that the information to which it leads is important by using a phrase such as “SEC Legend.” Norwitz further notes that social media sites like Facebook that do not limit the amount of text in a communication must still have the full company legend in the body of the message to investors.
“The new guidance will enhance the ability of market participants to use character-limited social media like Twitter to disseminate information to investors, which is likely to be especially welcome in high-tech industries where such media are an increasingly vital communications platform,” Norwitz writes.
Norwitz also explains that “dueling tweets have featured prominently in recent activism campaigns and proxy fights involving high-tech companies, most notably eBay’s defense against a proxy contest launched by Carl Icahn.”
In fact, Norwitz adds, the SEC’s guidance also allows activist hedge funds and governance activists to begin communicating to investors before they file a proxy statement with the SEC.
“Companies and their boards will have to be prepared to defend against such attacks and might consider establishing a social media rapid-response team in order to improve their own social media profiles, leverage their networks of friendly followers, and ensure that all participants are coordinated with the company’s messaging in the case of an attack,” Norwitz writes.