No matter how this ends up playing out it will certainly impact how public companies and their CEOS see Facebook – as well as Twitter and LinkedIn (LNKD)—as a way to communicate information. Though many high profile CEOs – and certainly every major company—have both Facebook and Twitter profiles, not to mention LinkedIn pages. But this is the first time the SEC has waded into this very murky area. Will these ostensibly public forms replace—or serve as a real alternative-- to BusinessWire?
CNBC's Herb Greenberg wrote a very prescient blog back in July – "
Did Netflix Violate Fair Disclosure Rule?
He pointed out that if the SEC is forced to weigh in on what is considered "public" in social media, and the SEC ends up ruling that Facebook counts as "public" under Reg FD, it could conceivably force shareholders to join Facebook to ensure they have access to news. That could help put the social network on a new plane in terms of its role as a news service. Greenberg also points out that Elon Musk, CEO of Tesla, tweeted Tuesday that Tesla was narrowly cash positive last week, which moved the stock.
Here's Reed Hastings full statement to the SEC:
SEC staff questions a Facebook post. Fascinating social media story.
We use blogging and social media, including Facebook, to communicate effectively with the public and our members.
In June we posted on our blog that our members were enjoying "nearly a billion hours per month" of Netflix, and people wrote about this. We did not also issue a press release or 8-K filing about this.
In early July, I publicly posted on Facebook to the over 200,000 of you who subscribe to me that our members had enjoyed over 1 billion hours in June, highlighting how strong our content was. There was press coverage as there are many reporters and bloggers among you, my public followers. Some of you re-posted my post. Again, we did not also issue a press release or file an 8-K about this.
SEC staff informed us yesterday that they are recommending that the SEC bring a civil action against us for my July 1 billion hour public post, asserting we violated "Reg FD". This rule is designed to ensure that individual investors have equal access to information as large institutional investors, by prohibiting selective disclosure of material information. The SEC staff believes that I gave you all "material" investor information in my post and that we needed to instead release the June viewing fact "publicly" with an 8-K filing or press release.
I want to note a few things.
First, we think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers.
Second, while we think my public Facebook post is public, we don't currently use Facebook and other social media to get material information to investors; we usually get that information out in our extensive investor letters, press releases and SEC filings. We think the fact of 1 billion hours of viewing in June was not "material" to investors, and we had blogged a few weeks before that we were serving nearly 1 billion hours per month.
Finally, while our stock rose the day of my public post, the increase started well before my mid-morning post was out, likely driven by the positive Citigroup research report the evening before.
We remain optimistic this can be cleared up quickly through the SEC's review process.
Here's what Hastings posted on Facebook in July:
Reed Hastings: Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we'll blow these records away. Keep going, Ted, we need even more.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin