As the use of social media continues to grow, social media is likely to play an increasingly more prominent role in proxy contests. In this context, the recent Compliance and Disclosure Interpretations issued by the SEC’s Division of Corporation Finance provide helpful clarifications on how social media outlets can be used in proxy contests in compliance with SEC regulations.
SOCIAL MEDIA’S IMPACT ON PROXY CONTESTS
Activist investors have used social media and have at times been able to “move the market” through social media statements in support of or against a public company. Carl Icahn first used Twitter to express his concerns against Dell Inc.’s buyout in 2013, referencing his interest in Dell in his first Twitter posting. Icahn also made extensive use of social media in the recent eBay, Inc proxy contest, in which Icahn pressured eBay to add two of Icahn’s nominees to eBay’s board of directors and to spin off eBay’s PayPal division. Icahn made multiple statements related to the eBay proxy contest through his personal Twitter account, including a link to an article about eBay’s corporate governance problems, links to letters on Icahn’s website supporting his position and criticizing eBay, and short jabs at eBay that could stand alone within the 140 character limitation of a Twitter post. Similarly, members of eBay’s board also used Twitter to announce their positions against Icahn in the proxy contest (In April 2014, Icahn and eBay reached an agreement that put one of Icahn’s nominees on the eBay board).
In the general effort to inform and persuade shareholders during a proxy contest, social media can be a powerful tool, and it can grab the attention of a larger audience. As Carl Icahn’s example suggests, social media can be used to make statements with a length and tone tailored to a specific social media platform, and to share links to information and analysis that provide more depth and greater disclosure to an interested reader.