Any small cap company will be well aware that securing the opportunity to promote their news in the media is becoming harder.

The media landscape is shrinking and outside of the ASX200 there’s a slim chance of getting wall to wall press.

This is why social media has been rising as an alternative channel for small cap companies to get their news out to investors.

It’s a free tool and used by billions of people. With so much conversation it makes sense that it has become a source of information for investors.

A study by Emerald Insight found that Twitter can be used to add value if firms interact and reciprocate with stakeholders.

Similarly, another study by Finextra found that 63% of investors believe a stock’s valuation can be linked to the sentiment on its social media channels.

What are the draw cards?

It’s important to be understood by investors – it helps increase a company’s ability to raise capital, increase liquidity and attract customers.

Social media provides small cap companies the ability to talk directly to potential investors and get their message across.

It provides the opportunity for companies to build their own communities of investor followers – giving them a direct target audience of investors who have an interest in what they have to say.

Social media provides an outlet to share more than regulatory reports and material information.

It allows companies to keep the market informed of other important (but immaterial) movements in its market, such as industry reports, key industry events it is attending or new initiatives and charity work.

It is a place to share more engaging content such as videos, interviews and photographs from events and conferences and when the company does earn some great media results these can be shared more widely.

While it seems straight forward, there are many barriers preventing small cap companies from doing this successfully.

What are the barriers?

Lack of time

 
There’s no doubt about it – social media takes time and effort and dedication to the task.

It requires consistency and can therefore be time consuming. And with multiple tasks to manage it’s not always front of mind for most CEOs and boards.

Quality content

 

Then there’s the content. Posting out a stream of regulatory ASX announcements isn’t engaging content and it’s unlikely to capture the attention, let alone the imagination, of your audience.

The content has to be engaging – and this also takes time, and expertise.

Knowledge and expertise

 

It’s not only ASX announcements that investors want to know about. Determining what other information is of interest and how best to present that information needs a level understanding of capital markets and of the business.

It’s a balancing act to bridge the gap between investor knowledge and social media expertise.

Whilst a tech company tends to be more digitally savvy than a mining company, it still doesn’t mean they understand the intricacies of a best practice social media strategy.

It’s not just about building a large number of followers, it is about building a follower community who are interested in the company’s stories and driving engagement with them.

A follower list of thousands of irrelevant people who have no interest in the company isn’t valuable at all.

But a follower list of hundreds of people who are industry participants, stock brokers, advisors, institutional and retail investors is far more valuable from an investor perspective.

Followers who have no interest in your content will not engage with it and they certainly won’t act upon it.

But why do listed companies need social media again?

Mining companies don’t find customers for its commodities on Twitter and biotech companies don’t recruit for clinical trials through Facebook (well not yet anyway).

But investors are highly active on social media – especially on Twitter. And ASX companies have shares to sell.

No investor is going to buy shares in a company they’ve never heard of. So, quite simply, social media is a more effective channel to reach investors.

There are nearly 2,500 companies on the ASX – what investor has the time or inclination to sit down and research them all?

Have your story heard

 

Smaller companies struggle to get broker coverage and press coverage making gaining ongoing interest from retail investors challenging when they can’t get their story heard.

Social media provides companies the opportunity to have their say, be part of the conversation and be understood.

Instead of shouting into an echo chamber companies can leverage social media to communicate with a wider audience who are far more engaged.

Executive profiles are important too

 

However, this shouldn’t stop at the company’s pages.

The management of the company shouldn’t neglect their social profiles either. A great LinkedIn profile of a company executive is more likely to sway investor support and hopefully new investment than one that is non-existent or poorly maintained.

The case may be different if you have an award-winning board that are very well-known and don’t need a social account to tell people about their expertise.

For example, Warren Buffett likely doesn’t need a LinkedIn account to promote his successes – but he does have an active and engaging Twitter account. Because personal brand for him is important.

Be part of the conversation

 

Companies without a social media presence are leaving the conversation up to others.

It’s better to be part of the conversation and driving the conversation around your company than letting others do it for you, which can result in negative sentiment and incorrect information.

With social media, small cap companies can gain the attention of investors and provide them with the information and materials they need to make an investment decision.

 

This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.