NEW YORK (TheStreet) -- Netflix (NFLX) and its CEO Reed Hastings received a Wells notice for a Facebook (FB) post. But the implications will go much further than Hastings and Netflix. This may well be the defining moment of social media when it comes to finance.
Public companies often have social media policies that preclude some employees from posting facts about the company itself for this very reason. They are scared of receiving these types of letters from the Securities and Exchange Commission, for fear of repercussions, fines, and perhaps even worse.
The issue brings to mind just how public is a social media account from a CEO, like Hastings or any of the other CEOs who use Facebook or Twitter to discuss their business.
Just recently, Tesla Motors (TSLA) CEO Elon Musk tweeted that the company became cash flow positive. "Am happy to report that Tesla was narrowly cash flow positive last week. Continued improvement expected through year end," the South African born Musk wrote in a tweet.Knowing that a company is cash flow positive is material information, but Musk, instead of putting it in an 8-K, chose to do so in a tweet. Musk has over 114,000 followers, a fairly significant amount, but I would bet that not all of his shareholders use Twitter. Sure, the information became widely reported once Musk tweeted it, but the disclosure of the information is what is at stake here, not the inevitable follow up and analysis of the information. Many investment banks are fearful of letting employees use social media, and it looks like those fears may ultimately be proven correct, depending upon the outcome of this case. Hastings, with his usual bravado, thinks the company will be vindicated. "We remain optimistic this can be cleared up quickly through the SEC's review process," Hastings wrote as part of his Facebook post about the SEC Wells notice. There are plenty of places where social media and finance come head-to-head every day, and the regulation is murky at best. Places like StockTwits have tight in-house regulations and offer transparency but are not monitored by the SEC as part of Reg FD.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV