Posted December 7, 2012 8:39 am by with 2 comments

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Kids these days.

You tell them over and over again that you have to be REALLY careful what you say on social media because it can get you in trouble. Some of the really smart ones take heed and do the right things. Many simply do what they think is right they act surprised when the #2 hits the fan.

That’s kids. Now let’s talk about an even more arrogant and likely to not listen to anyone else but themselves group: the corporate CEO. The latest example of “CEO’s Gone Wild on Social Media” comes from Netflix, CEO Reed Hastings.

Computerworld’s Richi Jennings reports

Netflix (NASDAQ:NFLX) is in big trouble with the SEC. Reed Hastings, its CEO, posted information to his Facebook (NASDAQ:FB) page that the regulator says was “material” to investors. The SEC’s Notice says the company should have put it in a conventional press release to investors, so that it was in the public domain.

So what it that Hastings posted that got the SEC’s attention? Business Insider reports

In this case, the Wells notice relates to information Hastings disclosed on his Facebook page. In July Hastings said Netflix users had streamed 1 billion hours in June for the first time ever.
Netflix’s stock jumped 6% on the news.

The SEC thinks it was material information that should have been more formally announced.

As one might expect Hastings doesn’t see it that way at all. Here is his statement in an exhibit that is part of an SEC filing courtesy of Business Insider.

SEC staff questions a Facebook post. Fascinating social media story.

We use blogging and social media, including Facebook, to communicate effectively with the public and our members.

In June we posted on our blog that our members were enjoying “nearly a billion hours per month” of Netflix, and people wrote about this. We did not also issue a press release or 8-K filing about this.

In early July, I publicly posted on Facebook to the over 200,000 of you who subscribe to me that our members had enjoyed over 1 billion hours in June, highlighting how strong our content was. There was press coverage as there are many reporters and bloggers among you, my public followers. Some of you re-posted my post. Again, we did not also issue a press release or file an 8-K about this.

SEC staff informed us yesterday that they are recommending that the SEC bring a civil action against us for my July 1 billion hour public post, asserting we violated “Reg FD”. This rule is designed to ensure that individual investors have equal access to information as large institutional investors, by prohibiting selective disclosure of material information. The SEC staff believes that I gave you all “material” investor information in my post and that we needed to instead release the June viewing fact “publicly” with an 8-K filing or press release.

I want to note a few things.

First, we think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers.

Second, while we think my public Facebook post is public, we don’t currently use Facebook and other social media to get material information to investors; we usually get that information out in our extensive investor letters, press releases and SEC filings. We think the fact of 1 billion hours of viewing in June was not “material” to investors, and we had blogged a few weeks before that we were serving nearly 1 billion hours per month.

Finally, while our stock rose the day of my public post, the increase started well before my mid-morning post was out, likely driven by the positive Citigroup research report the evening before.

We remain optimistic this can be cleared up quickly through the SEC’s review process.


When you look at the act that the SEC is talking about, it seems reasonable that one could say his statement influenced the stock. It could also be argued that the movement came from an analyst report that happened earlier in the same day. It could also be argued that the information reached more people than a press release might. You could argue a lot of things here.

What we probably need to be discussing are the landmines that can be tripped when a CEO of a publicly traded company who has fiduciary responsibility is out and about on social media. I am not pointing at Hastings and saying he was wrong or is one of those idiots who doesn’t get it. As many have noted on other articles I have read, it may just be that the SEC doesn’t ‘get’ social media. That is VERY plausible since the SEC is an ivory tower entity that wouldn’t dare stoop to the level of dealing with those social media hordes. Instead they pass judgment with little knowledge of what they are talking about which is pretty scary in its own right.

So while this social media act by Hastings could certainly put him in the Social Media Hall of Shame he may be getting some unfair credit on this one.

What do you think?

  • @deanshaw

    It certainly highlights the landlines that social media presents, especially when it comes to public companies communicating with its fans and followers. Having said that I might argue that a statement on social media and how that gets picked up by the media might reach more of the general public than an 8-K filing or press release. I mean seriously, who besides hard core investors read 8Ks?

    • I agree (although it pains me 🙂 ). That’s the stance that Hastings is taking and this could actually serve as a bit of a landmark case where the SEC could see that communications beyond their ideas of traditional financial updates and reporting have evolved while their view of communications has likely never left the 1950’s.