It’s an exciting time in the investor relations (IR) industry. There is so much change and so much opportunity for publicly traded companies in how they communicate. Yet, there are also so many questions and reasons to be apprehensive. While many have embraced social media with open arms, for investor relations professionals the rules and best practices are still being written and taking shape.To frame this discussion, let’s start with the question, “What are investor relations really about?” Ultimately, it is about valuation—the art of using language and communications to achieve the highest possible valuation for a company. Everything we do, including our engagement in social media, should follow the guidelines established by the Securities and Exchange Commission regarding Regulation Fair Disclosure (RegFD). In a nutshell, RegFD says that if a public company is going to disclose a piece of information that the ordinary Joe (or Jane!) would consider using as a basis for deciding whether to buy or sell stock, the information must be disclosed in a way so that it is available to everyone.

How the Internet changed investor relations and how social media is poised to change it furtherBack in the early 2000s, the Internet changed the way we communicate with investors. Early on, the IR section of a company’s website was a “nice to have,” not a “need to have.” Only forward-thinking companies incorporated IR sections into their corporate websites. Now, not only is it expected that a company have a dedicated investor relations page, but the SEC has outlined guidelines for how a company can use its corporate website for purposes of satisfying RegFD.

Social media presents challenges today that are similar to those posed by the IR section of a corporate website more than a decade ago. I predict that by the end of this decade, social media channels will be carefully watched and regulated by the SEC. It is therefore up to us to start thinking about what this will look like, help the industry create the best practices for incorporating social media into a public company’s day-to-day communications, and start the process of actually using social media in our investor communications.

How can companies leverage social media when communicating to their investors?

There’s actually a great deal companies can accomplish by using social channels to communicate with investors. We should think of social not as a separate discipline, but rather as an additional medium through which companies can get their key messages and investment propositions across to those who should be interested in investing and who can influence valuation.

Social media is a way to open up a dialogue with current and prospective investors and help amplify who a company is and what it stands for. The immediate feedback social media provides can help a company anticipate challenges and prepare appropriate responses. It also can allow for the ability to correct information and provide more context and color to the overall corporate story.

Social media can also be used for investor outreach purposes. Liquidity (i.e. trading volume) is an issue facing many public companies. Reaching out to investors via social media channels (e.g. Twitter, LinkedIn, SeekingAlpha, etc.) can be a great way to target the hard to reach individual or retail investor who has the ability to buy shares and bring greater liquidity into a company’s stock. Up until now, companies were left to create their own proprietary databases and disseminate news and information to these individuals who “opted in.” Social media extends this reach and allows companies to repurpose and cross-promote content to those they would never even think of or be able to communicate.

Incorporating social media to an investor relations program may appear onerous, time consuming and another thing to worry about. However, from an IR communications perspective, it should be viewed as a great thing. Companies that appreciate the value of being public should embrace social media as a way to add more color to their corporate and stock story. It is another means to enhance the way in which investors perceive public companies in order to help them achieve the highest and most accurate valuation.