Reed Hastings, chief executive officer of Netflix, Inc. (NASDAQ:NFLX) posted the quarterly viewership data of the company on Facebook Inc (NASDAQ:FB) after announcing that he will use social media to take advantage of new rules implemented by the Securities and Exchange Commission (SEC).
Last week, the securities regulator cleared Hastings and Netflix, Inc. (NASDAQ:NFLX) in its investigation regarding a possible violation of the Regulation FD and Section 13 (a) of the Securities and Exchange Act of 1934 after announcing the streaming metrics of the company on Facebook Inc (NASDAQ:FB) last year.
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According to George Canellos, acting director of SEC’s enforcement division, “Most social media are perfectly suitable methods for communicating with investors, but not if access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
Hastings latest post on his Facebook profile reads, “Over the last three months, you all watched over 4 billion hours on Netflix.”
In a regulatory filing, Netflix, Inc. (NASDAQ:NFLX) wrote that it is encouraging investors, media, and other entities interested about the company to review the information it is posting on social media sites.
The online video streaming company said it will continue to use its website in posting financial announcements, regulatory filings, and press releases. According to Netflix, Inc. (NASDAQ:NFLX), it will also announce material information on its Facebook Inc (NASDAQ:FB) and Twitter accounts, Hastings FB page, Netflix, Inc. (NASDAQ:NFLX) blog, and Netflix, Inc. (NASDAQ:NFLX) tech blog.
The SEC allows companies to use social media sites in announcing material information, but investors should be informed about it.
Some entities such as Business Wire, a unit of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) commented that the new regulation of the SEC allowing the increased use of social media sites to post financial information is hurting investors. Business Wire distributes press releases for Warren Buffett’s conglomerate.
Business Wire wrote in a statement that the SEC guidelines, “poses a disservice to the investment community, threatening increased fragmentation of price-sensitive information.” The media company also raised privacy concerns because users are required to register or log-in to their accounts to access material information, which poses security risks that may adversely affect market stability.
Wedbush Securities analyst Michael Pachter has a similar opinion. He said the SEC made a mistake. “This is going to backfire on them, and a prudent company wouldn’t consider Facebook Inc (NASDAQ:FB) or Twitter as their only means of public dissemination of material information.”