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Is a Faceboook post a press release?
December 7, 2012 11:13 AM   Subscribe

Back in July, Netflix CEO Reed Hastings posted on his Facebook page that users of the service had enjoyed over 1 billion hours of viewing in the month of June. The post was (and is) public, and subscribed to by over 200,000 users (some of whom were journalists). Netflix stock jumped for the day on the news. But the SEC was apparently less impressed.

Concerned that the viewer information was "material investor information", the SEC is asking why Netflix did not disclose this information in a Form 8-K or a press release. The purpose of the rule is to ensure that better connected investors do not get material information before the general public. Generally, companies do not have to file 8-K's if the information can be found on the company's web site.

Hastings has chosen to comment on this investigation in the only logical place: his Facebook page.
posted by sparklemotion (42 comments total) 3 users marked this as a favorite

 
"enjoyed"
posted by item at 11:16 AM on December 7, 2012 [1 favorite]


Why didn't they do both? Reed Hastings is so fuckin' bush league.
posted by basicchannel at 11:17 AM on December 7, 2012 [2 favorites]


Way to look like useless federal waste SEC
posted by sonic meat machine at 11:17 AM on December 7, 2012 [5 favorites]


the question the SEC and Netflix will likely try to hash out is whether investors look to Facebook or Twitter for trading information. If the answer is yes...

WTF world are they living in? 9 out 10 hobos could provide the correct answer to the question the SEC is trying to "hash out". Of course, 9 of 10 hobos were formerly employed in the financial services sector, but it wouldn't necessarily have to be the same 9.
posted by stupidsexyFlanders at 11:18 AM on December 7, 2012 [22 favorites]


I'd like to imagine that this news sent the CEO of McDonalds into some sort of Jack D. Ripper fugue and he's now barricaded in his office with an M-16 and a terrified intern.
posted by griphus at 11:24 AM on December 7, 2012 [6 favorites]


Maybe I should make myself more clear: I enjoy Netflix movies all the time, just as I enjoy movies on Amazon Prime or enjoy a big bowl of soup. Things start teetering off into Ughville, though, when a major CEO uses the term 'enjoy', because everyone knows that robots as-of-today lack the capabilities required for enjoyment.
posted by item at 11:25 AM on December 7, 2012


Things start teetering off into Ughville, though, when a major CEO uses the term 'enjoy'

"enjoyed" was my terminology. I am happily not a CEO of a major corporation, though I would gladly enjoy the salary of one.

Given that June was just after my spring semester ended, I think it's safe so say that a good portion of those enjoyed hours were enjoyed by me.

enjoy.
posted by sparklemotion at 11:28 AM on December 7, 2012 [4 favorites]


Reed Hastings is so fuckin' bush league.

Way to look like useless federal waste SEC

Who's more fool here? The enforcers of the foolish rules? Or the foolish CEO who does not follow them?
posted by sparklemotion at 11:31 AM on December 7, 2012 [2 favorites]


the question is was any stock sold by insiders that day? that's where you'll find the rubber hitting the road. If soft and unsupported information like this was given out on facebook and then insiders dumped stock that same day--you have a problem.

I highly suspect this is the case.

Let's look at the numbers too. Netflix was trading at $300 a share last year. Now its trading at $87. There's a strong incentive to drop this stock by insiders as soon as possible. There has got to be some selling activity to make the Enforcement Division even think about using their scarce resources to get on this.

I clerked in the Enforcement Division. It isn't big, so there must be something to the trading patterns to get this looked at, otherwise it wouldn't be worth the effort.
posted by Ironmouth at 11:33 AM on December 7, 2012 [15 favorites]


Who's more fool here? The enforcers of the foolish rules? Or the foolish CEO who does not follow them?

When pressed, it's always best to choose Reed Hastings. Even if he's not one of the options.
posted by sutt at 11:34 AM on December 7, 2012 [4 favorites]


Just wanted to know if anyone wants any additional information about Form 8-k. Because I know All. Of. It.

*sigh*
posted by gagglezoomer at 11:34 AM on December 7, 2012 [4 favorites]


If soft and unsupported information like this was given out on facebook and then insiders dumped stock that same day--you have a problem.

I will admit I do not understand these things too well but is is a problem because it would be considered malicious or because it was bad due diligence?
posted by griphus at 11:35 AM on December 7, 2012


Way to look like useless federal waste SEC

There are strict rules for what you are and are not allowed to say publicly as a publicly-traded company. They are there for very good reasons - to prevent corporations from pumping their own stock - and if they aren't enforced these rules won't be respected.

In particular, it's incredibly stupid and an incredibly bad example to others to post statements that have bearing on future earnings on Facebook.

People should know about the history of the exchanges - that when they first started they were a contrivance for the rich to fleece the rest of the world by promulgating false information to start buying and selling panics, to the point where no one trusted the markets. The reforms after the crash of 1929 put a pretty tight lid on such activities which lasted until Ronald "Destroyer of America" Reagan deregulated much of the financial industry and set the stage for the global financial crisis we are currently experiencing.

The SEC is actually a revenue generator for the government, because of the scale of the fines they levy. Decrying their activities as waste is completely inaccurate.
posted by lupus_yonderboy at 11:35 AM on December 7, 2012 [56 favorites]


Everyone's debating whether this was effectively a press release or not. In my not-very-official opinion the real issue is that this data isn't material. It's a very small piece of trivia about Netflix's business. No analyst suddenly had their model all filled in and lighting up like a pinball machine with the addition of this data. The SEC is just looking to keep companies in line by roughing them up a little.
posted by GuyZero at 11:39 AM on December 7, 2012 [1 favorite]


Just wanted to know if anyone wants any additional information about Form 8-k. Because I know All. Of. It.

gagglezoomer: I was hoping that someone like you would come out of the woodwork to comment on this. Given that there seems to be an exception for Form 8-k if you put the information on a website, does a Facebook post meet the same policy goals?

And what makes something a "press release" anyways? Is there a specific place where press releases get filed?
posted by sparklemotion at 11:39 AM on December 7, 2012


the question is was any stock sold by insiders that day?

Nope, at least according to the Form 4s. It appears there was a scheduled grant of stock options to officers and directors on July 2.
posted by monju_bosatsu at 11:40 AM on December 7, 2012


It isn't about whether the SEC costs money or not, in reality. What it is about is the fact that Facebook is a public forum analogous to a company web site – as the posting was made visible to everyone who cared to see – and the fact that this provides the wonderful forces of deregulation with a perfect example of something pretty stupid to point to as an example of apparent government "meddling." I mean, I'm pro-regulation and this seems stupid to me.
posted by sonic meat machine at 11:41 AM on December 7, 2012 [1 favorite]


Netflix supplied the information in their 10-K (2 billion hours in 4Q), but did not renew the data in their subsequent 10-Q's, so I think they were being sloppy.
posted by rakish_yet_centered at 11:43 AM on December 7, 2012


If soft and unsupported information like this was given out on facebook and then insiders dumped stock that same day--you have a problem.

I will admit I do not understand these things too well but is is a problem because it would be considered malicious or because it was bad due diligence?


Its bad because the purpose of the 8-K filing is to give the details of the materiality of the information in a form which puts the company on the hook. The fact was, a billion viewings means nothing and Netflix is a company on a slow decline. If they had to file a 10K it would have put that in context. And the stock price wouldn't have jumped 13%. In essence the company might have been hyping a statement with less materiality than seems apparent. Since the people who are making the statement are insiders who own stock, they have to be careful not to use that information in a way that advantages themselves improperly.
posted by Ironmouth at 11:43 AM on December 7, 2012 [2 favorites]


Just wanted to know if anyone wants any additional information about Form 8-k. Because I know All. Of. It.

gagglezoomer: I was hoping that someone like you would come out of the woodwork to comment on this. Given that there seems to be an exception for Form 8-k if you put the information on a website, does a Facebook post meet the same policy goals?

And what makes something a "press release" anyways? Is there a specific place where press releases get filed?
posted by sparklemotionPoster at 14:39 on December 7 [+] [!] Other [4/4]: «≡·


I am not sure I can take any conversation between two people named "gagglezoomer" and "sparklemotion" all that seriously, regardless of the subject.
posted by briank at 11:44 AM on December 7, 2012 [4 favorites]


I am not sure I can take any conversation between two people named "gagglezoomer" and "sparklemotion" all that seriously, regardless of the subject.

Sometimes, I doubt your commitment.
posted by sparklemotion at 11:46 AM on December 7, 2012 [80 favorites]


the question is was any stock sold by insiders that day?

Nope, at least according to the Form 4s. It appears there was a scheduled grant of stock options to officers and directors on July 2.


The other question is evidence of proxy trading. That wont be on any form.
posted by Ironmouth at 11:46 AM on December 7, 2012 [1 favorite]


Where I bet this gets really interesting is that not too long ago, you could consider a Facebook post to a publicly accessible bulletin board to which updates are "pushed" (with immedate notifications going to anyone who had ever expressed interest in it).

Now of course, even if you pay Facebook gobs of money, it is completely impossible to actually be sure that 100% of your fans/subscribers/followers/etc have ever seen something. Exactly zero Facebook entities are now reaching all of their audience, all of the time (well, except maybe Facebook's own).

So today, a Facebook page essentially is a publicly accessible bit of content with which people can attempt to stay current...but ultimately only a magical certain subset of those people will ever be notified of changes (and who they are and what they see is determined entirely by the whims of Facebook).
posted by trackofalljades at 11:48 AM on December 7, 2012 [6 favorites]


sonic meat machine: "It isn't about whether the SEC costs money or not, in reality. What it is about is the fact that Facebook is a public forum analogous to a company web site – as the posting was made visible to everyone who cared to see – and the fact that this provides the wonderful forces of deregulation with a perfect example of something pretty stupid to point to as an example of apparent government "meddling." I mean, I'm pro-regulation and this seems stupid to me."

How would you change the regulation? The point of forcing it to be in a press release or on the company's website is that the company is in control of those, whereas a Facebook post is controlled by Facebook.

Should the regulation say "The information appears on one or more web sites maintained by the registrant, or Facebook"? Should it say "The information appears on one or more web sites maintained by the registrant, or any web site or social network that the public can view"? Not only does this consolidate a lot of power with the owners of the social network holding the data, but it also gives companies a way to selectively release the data to lesser-read outlets in an attempt to minimize the damage of bad news.
posted by tonycpsu at 11:56 AM on December 7, 2012 [1 favorite]


Next company going down: McDonald's and their "10 billion sold" signs.
posted by Benny Andajetz at 11:59 AM on December 7, 2012 [2 favorites]


I don't see how the number of hours viewed is material information except in the most cursory way. Surely what matters is the number of subscribers or (if netflix has an a la carte thing) number of shows viewed. So 1 billion breaks a record, that doesn't even demonstrate they have more subscribers. It could well be fewer subscribers watching more.
posted by juv3nal at 12:07 PM on December 7, 2012


How would you change the regulation? The point of forcing it to be in a press release or on the company's website is that the company is in control of those, whereas a Facebook post is controlled by Facebook.

Insofar as this is not specific information ("nearly" doesn't occur in many financial reports), is conducted via a medium which is a public outlet for the company, and constitutes what I'd think of as an "off the cuff" marketing statement, I just don't see how the thing applies. Lots of companies say lots of things. If he'd said this in his talk at the Amazon conference, for example, do you think anyone would notice or care? Werner Vogels, after all, told roughly how much server capacity AWS adds in a day – that's probably a bigger deal from the shareholder perspective than how many hours of streaming were consumed.

Look, there's good regulation and there's bad regulation. Good regulation protects shareholders and consumers. Bad regulation wastes regulators' time and efforts. This is bad regulation – or, at best, a bad application of good regulation.
posted by sonic meat machine at 12:09 PM on December 7, 2012 [1 favorite]


If this is information that might be germaine to investors, I would like to know that it was posted to the company's website as well.

I don't have a Facebook account, and if I were an investor who cared about this info, I would be annoyed that information that's potentially useful to me was only appearing in a restricted part of the internet.
posted by kristi at 12:16 PM on December 7, 2012


Lots of companies say lots of things, but those who have unreleased knowledge of information that could affect share prices know not to say those things until they're on the record, either filed with the SEC, or pushed out with a press release.

Neither the Amazon conference nor Facebook are covered under the regulation, so, again, I have to ask how you'd change the regulation itself so that you protect investors who aren't attending the Amazon conference, or monitor the company's web site for press releases but not the Facebook page.
posted by tonycpsu at 12:17 PM on December 7, 2012


Is a vague number of watched hours a "major event?" If not, then it doesn't need to be reported even under the regulation as it stands.
posted by sonic meat machine at 12:22 PM on December 7, 2012


Is a vague number of watched hours a "major event?" If not, then it doesn't need to be reported even under the regulation as it stands.

The "major event" language is from the non-legally-binding description of the 8-K. The language used in the regulation is "material nonpublic information", and I'd argue the number of viewing hours certainly qualifies.
posted by tonycpsu at 12:25 PM on December 7, 2012


Consider this:

(2) An issuer shall be exempt from the requirement to furnish or file a Form 8-K if it instead disseminates the information through another method (or combination of methods) of disclosure that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public.

800 million active Facebook users. "Nearly a billion." 200,000 subscribers to Hastings' feed. This is via a corporate medium – Facebook – but I would argue that this is broad and non-exclusionary distribution. I'm not a lawyer, of course... but there's a lot of hay to be made.
posted by sonic meat machine at 12:30 PM on December 7, 2012 [1 favorite]


I don't have a Facebook account, and if I were an investor who cared about this info, I would be annoyed that information that's potentially useful to me was only appearing in a restricted part of the internet.

"Restricted" is overstating the case, as the post was public and you can see it without having a Facebook account—just click the first link in the post.

However, I think your larger point is still valid; as tonycpsu points out, if you change "the company's website" to "the company's website, or Facebook," what other sites have to be added? Can you stop with just Facebook? Where does that slippery slope end? The investor who's trying to stay informed shouldn't have to check hundreds of websites on the off chance that the company decided to post new information on one and only one of them.
posted by DevilsAdvocate at 12:30 PM on December 7, 2012 [1 favorite]


sparklemotion: Reed Hastings is so fuckin' bush league.

Way to look like useless federal waste SEC

Who's more fool here? The enforcers of the foolish rules? Or the foolish CEO who does not follow them?
Group C: The SEC that does as little as possible to change the system after that little whoopsie in October of 2008.
posted by IAmBroom at 12:30 PM on December 7, 2012


Yeah, I hate regulations with overly-broad language like that, but the alternative is an unworkable set of very specific regulations with tons of loopholes, or no regulation at all. At some point, regulators gonna regulate, and you have to give them discretion to decide which ones reveal too much to too few people.
posted by tonycpsu at 12:31 PM on December 7, 2012 [3 favorites]


sparklemotion: Things start teetering off into Ughville, though, when a major CEO uses the term 'enjoy'

"enjoyed" was my terminology. I am happily not a CEO of a major corporation, though I would gladly enjoy the salary of one.
Ignore him. 99%+ of their customers enjoy the entertainment they pay for.
posted by IAmBroom at 12:33 PM on December 7, 2012


I can't chortle at the foolish SEC over this one, no. Number of monthly views is material information. If you combine that data with the number of subscribers, you can work out the average amount viewed per subscriber. Netflix is a pretty cheap subscription and it probably takes a while for people to notice that they are not using it as much anymore and then cancel. If you're an investor it's one way to track Netflix's strength -- are they likely to keep the subscribers they have, or are they likely to lose more over the next period? I'd definitely work those numbers into my valuation model.

The point of making the public information available via the 8-k forms, press releases (which are distributed through a wire service, if you follow a company you don't have to wait for the WSJ to pick up the story), and the company's investor relations website is to ensure that the public information is accessible in a timely fashion. Facebook is not the medium for that. It's akin to forcing an investor in Kroger to monitor a coupon website to find same-store sales growth.

Also - if publicly-traded companies could disclose information whenever, wherever, no consistency required, what's to stop them from disclosing bad news on a "close friends only" Saturday afternoon status update, while good news gets the Monday morning press-release and conference call treatment?
posted by stowaway at 1:28 PM on December 7, 2012 [2 favorites]


how is he still at the helm after the whole Qwikster debacle?
posted by lily_bart at 1:40 PM on December 7, 2012


So this is where we are supposed to applaud the cops for going after a guy who threw a Timmys cup on the ground?

Clap. Clap. Clap.
posted by seanmpuckett at 1:41 PM on December 7, 2012


DevilsAdvocate: "Restricted" is overstating the case, as the post was public and you can see it without having a Facebook account—just click the first link in the post.

stowaway: It's akin to forcing an investor in Kroger to monitor a coupon website to find same-store sales growth.

That gets a bit closer to my point - if I'm a Netflix investor, it's reasonable and sensible for me to look at the Netflix website (especially the Investor Relations section) for information about the company.

Having to find it on a third-party website that significantly restricts my access is unreasonable.

While it's true that I can view that individual Facebook post (the first link in the post above), I cannot view it on Reed Hastings' Facebook page, which contains basically no info if you're not a Facebook member. How would I, as an investor, have found that post? How would I even know it existed? Whereas, if it were posted to the Investor Relations section of the website, it would be easy to find. There's a nice little RSS feed and everything.

Facebook is not the unrestricted internet - and that's fine. But if corporate executives use it as if it were, they're making a mistake.
posted by kristi at 2:28 PM on December 7, 2012 [5 favorites]


I would suggest that if you're considering investing in a company, you should probably rely on more sources of information than just the company's press releases.

I guess my question is, what is the standard for information that requires the press release and filed paperwork treatment? Would netflix be ok if they had trumpeted their viewing numbers in advertisements but not in something resembling a press release?
posted by Pyry at 4:05 PM on December 7, 2012


It isn't about whether the SEC costs money or not, in reality. What it is about is the fact that Facebook is a public forum analogous to a company web site – as the posting was made visible to everyone who cared to see
I don't think that's really accurate. If you're a stock trader you will probably get news alerts on your companies whenever they issue a press release or file a government form. You wouldn't get that automatically if it's posted to facebook.

I never "friended" corporate CEOs when I was dabbling in day trading, are you facebook friends with the CEOs of all the companies in your retirement account?

The implementation of the rule might seem silly when someone has 200k FB friends. But what if they have 10,000, or 1,000? Where do you draw the line?

It's still Insider information if you're not associated with the company. Just ask Martha Stewart.
Insofar as this is not specific information ("nearly" doesn't occur in many financial reports), is conducted via a medium which is a public outlet for the company, and constitutes what I'd think of as an "off the cuff" marketing statement, I just don't see how the thing applies. Lots of companies say lots of things.
But, there is a legal difference between stuff said by a CEO and stuff said by a marketing peon. There are a bunch of rules, and it depends on whether or not you have access to the "insider" info.

If you don't want to be bound by those rules, you don't have to become the CEO of a publicly traded corporation.
posted by delmoi at 5:53 PM on December 10, 2012 [3 favorites]


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