Metal-Pages found that a growing number of stock market listed junior mining companies with market capitalisations below US$50 million are increasingly using social media to connect with small investors who represent a vital source of finance.
Most of the companies surveyed said social media represented a cost effective way to engage more closely with their shareholder base and was an ideal medium for monitoring investor sentiment. An increasing number are becoming more imaginative in their use of social media to maintain and raise their profile with investors.
In a survey of 30 randomly selected junior mining companies, mostly listed in North America, Metal-Pages found that 24 (80%) of the sample use social media as part of their investor relations programmes to raise their profiles.
Of the 24 using social media for investor relations, all said they used Twitter, while 19 (~80%) use Facebook. The two social media platforms were cited as very clear favourites for engaging with investors. The five that were not yet using Facebook, said they were investigating the prospect of doing so.
In third place, 12 mining companies (50%) said they used LinkedIn, though that was more for recruitment and finding suitable technical partners. Other social media platforms used in varying degrees include YouTube, Slideshare, Flickr, Stocktwits, Waggle (Canadian social media platform for investors) and Global Rock Exchange (mining networking site).
Due to their relatively small market capitalisations and lack of regular news flow, junior mining companies tend to be ignored by many larger publications and by much of the investment community. A lack of visibility can lead to the shares of these companies becoming over-looked and this can impact valuations and liquidity. Many see social media as an ideal way to address this issue in a cost effective way.
Metal-Pages found that social media is effectively bringing small listed mining companies closer to their shareholders, who are typically retail investors – a group which itself often feels disenfranchised from listed companies, especially large ones which tend to pay more attention to institutional shareholders. Also, many junior mining companies are too small to be of interest to big institutions.
North American based junior mining companies were generally more enthusiastic and advanced in their use of social media than their peers in Australia and Europe, many of which have only made very tentative steps towards using this media.
There is without a doubt a very large number of retail investors using social media to monitor their investments and to find new investment opportunities with around 1.6 million Facebook users apparently including investing as part of their profiles. Apart from the many investment forums there are also dedicated investor-focused social media platforms such as Stocktwits, which is very much modelled on Twitter.
Many, including professional investors, are using social media to monitor investor sentiment towards listed companies to help them discern the potential direction of share prices.
Institutional investors, analysts and brokers are increasingly using Twitter to ‘listen’ to what’s being said about the companies they follow. Often looking to see breaking news before it hits the newswires and thereby giving them an edge over other investors and traders.
All Social Media Users Were Unanimous That It Is:
- An ideal way to continuously engage with their investor base or with new investors. Some junior mining companies said that as a result of their social media activities new investors have come on to their shareholder registers. However most see it as a way of supporting their existing shareholder base and not as a means of promoting stock as this could have legal ramifications.
- An excellent tool for tracking what is being said about them – even the companies who do no use social media activities recognised the value of doing this.
- A different means of ensuring investors are kept up to date with the latest company developments.
- A platform to help to better educate investors and to tell their story
Other Reasons Commonly Cited:
- Ideal for carrying out personalised communications with investors.
- To build new relationships with peers in the industry – at least one company executive said their social media activities had led to the formation of new business relationships within the mining industry.
- To engage with journalists, bloggers and social media influencers.
- The most enthusiastic social media adopters embrace it as a low cost means of engaging with investors.
- A powerful means for driving traffic to their websites and for improving search engine rankings.
- To gain a better understanding of shareholders and their needs.
The 20% Who Don’t Use Social Media Were Unanimous In Their Reasons For Not Doing So:
- They are concerned over potential compliance violations as listed companies, such as mistakenly revealing price sensitive information, which could lead to law suits and other types of reputational damage. All pointed out that stock exchanges increasingly monitor the social media activities of listed companies.
- They see a manpower resource issue – of not having enough personnel to look after the social media side. They see sending out tweets, real time or regular engagement as simply too time consuming.
These two factors alone made them question whether social media was really worth the effort. However, a number of mining executives sceptical of social media drew comparisons with chat rooms where they characterised the level of debate as often being uninformed and highly emotive and did not want to get dragged into long heated discussions with futile outcomes or potentially litigious consequences if they accidentally revealed price sensitive information.
Other Reasons Cited For Not Using Social Media:
- They feel their websites already do an adequate job of informing investors.
- The company’s shares are overwhelmingly held by a small number of investors with a long-term investing horizon and also communicate directly with management.
- They can reach investors directly via their mailing lists.
- Their companies are already being discussed on Twitter or chat rooms and are therefore already getting some profile from the efforts of others.
Investor Relations Social Media Strategies
The more creative junior mining companies treat their websites as if they are a media outlet using high quality written as well as a range of audio-visual content to inform and educate visitors with a regular stream of news and views.
Integrating social media into the website and making it part of the overall communications strategy is useful for driving visitor flow and can greatly amplify investor relations’ messages across the investment community. Also, many social media platforms such as Twitter adapt well to mobile devices, which are becoming increasingly prevalent and all the big providers have apps designed for such devices. Done well social media can greatly enhance visibility and profile.
Typically social media along with more traditional channels is used for making official announcements such as for earnings and updates on mining activity. Some investor relations professionals will tweet company presentations as they are being delivered live as not all investors will have the time or desire to listen in to an earnings call, but would appreciate seeing real-time updates streaming on Twitter or posted on Facebook. The same applies to the question and answer sessions following a presentation.
Though essential, only putting out official announcements greatly under-utilises the potential of social media and misses out on opportunities to engage with a very large number of investors.
Realising that their own news flow is too infrequent to regularly engage with investors many resort to posting links to interesting information from respected third party websites, which are relevant to the mining company. For instance, for a gold mining company this could be articles relating to the prospects of the gold price, how to invest in junior mining companies or interesting facts and figures about their industry.
The more proactive mining companies will seek imaginative ways to generate their own content, which is unique to them and can sometimes be viral in nature if it captures people’s imagination. This could also involve pictures or videos of a recent visit to a mine, which could be an excellent opportunity to better explain the investment proposition in pictures or to provide a progress update. Others will highlight recent interviews with journalists or an appearance on a television programme. Also, some executives write blogs and tweet views on regulatory developments.
Social media is also an excellent listening tool and investor relations professionals can quickly pick up on dissent and if based on misinformation or a lack of understanding, can quickly correct it before it has an impact on the share price. However, any such engagements have to be done within legal restraints pertaining to areas such as insider information. But in spite of these legal restraints, social media still represents a cost effective way to engage with the investor community, according to those mining companies, which use it regularly.
A few mining executives found searching chat rooms and Twitter useful to anticipate possible questions from shareholders ahead of earnings calls or meetings. This could take the form of one investor asking another; “when you attend the meeting ask the CEO this..”
However, there is a dark side to social media and one that can be very damaging.
Australian-based rare earths mining company, Lynas Corp, with a processing plant in Malaysia has been on the receiving end of a campaign to have the plant shut down by local protesters as they allege it poses health and environmental risks because some of the waste is radioactive.
The ‘Save Malaysia Stop Lynas‘ campaign used Twitter, Facebook, blogs and websites to great affect in promoting their message and gathering many thousands of supporters in Malaysia and across the world. It helped make the issue political and has attracted the interest of the international media. The company admits it underestimated the power of social media. Such activities can have consequences for the share price, public perceptions, on regulatory bodies and on the political environment a mining company has to navigate.
For the dissatisfied social media has become an excellent platform for finding and rallying supporters as the ‘Save Malaysia Stop Lynas’ movement has done.
For mining companies the power of social media, which can greatly amplify discontent, including that of investors, underscores the need to not only adhere to internationally accepted best practices, but also to actively engage with stakeholders from the earliest stages of a mining project and to ensure concerns are promptly addressed. A transparent and honest communications strategy is highly advisable.
With social media, a crisis can break very quickly and can go viral in a way that it wouldn’t have done before, particularly with the potential of so many different platforms to interact with each other such as Twitter, Facebook, Youtube, LinkedIn, Flickr and so on. Also, search engines such as Google don’t forget, even though the crisis might pass quickly, because of the relatively short attention span in the social media sphere. Therefore search engine optimisation strategies are also an important consideration.
The plus side is that crises can pass quickly in the social media sphere once addressed. Fortunately, social media is about dialogue, so there is an opportunity to get involved early on and put over the company’s point of view, which is not always possible with more traditional forms of media where there is an editorial filter.
Metal-Pages estimates that with the growing convergence between different types of media, it will become harder to ignore social media and all listed companies will have to work with it one way or the other as the conversations about them will go on regardless of whether they have a presence or not. It will become part of the cost of being in business.
Yet there are many positives to be gained from using social media and it is an excellent medium to keep shareholders informed, involved and interested as well as an opportunity to broaden the shareholder base. In many parts of the world retail investors now have the opportunity to buy and sell shares in foreign countries.
It is also an effective way of ‘listening’ to the market and offers opportunities to quickly dispel rumours and misinformation about the company.
Success with social media for investor relations professionals is very much down to keeping investors interested and maintaining the company’s profile in between the really important announcements, such as earnings, which really drive the share price.
Note: Metal-Pages randomly selected 30 junior mining companies listed in North America, Australia and Europe covering precious metals, base metals, minor metals and rare earths with a market capitalisation of under $50 million.
About Metal-Pages: A UK-based provider of prices, news and analysis on rare earths, minor metals and ferro-alloys. Prices published by Metal-Pages are used as industry benchmarks for contracts. Metal-Pages also hosts conferences and can assist with producing content.
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