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How Social Media Can Create An Instant Investor Relations Crisis

Posted By Tyler Horne, Friday, August 7, 2015
investor relations services

This July, little known small cap stock IDI, Inc. presented a perfect example of how social media is changing the investor relations industry for good. A full-blown crisis kicked off on July 21, when an anonymous blog post went live on several investor blogs. The anonymous post called IDI a "strong sell," and claimed the company had engaged in a "Yahoo message board stock-pumping scheme," while also accusing its chairman of an alleged sketchy history of bankruptcy and fraud lawsuits.

The post certainly looked legitimate, and it set off a social media firestorm. Of course, the accuracy of the post has since been called into question completely. The veracity of the post isn't the lesson. Instead, it's important to note that the story spread across social media among users who had no way of knowing whether it was true or not.

Instantly, IDI stock began to plummet, although it's since stabilized because of a strong public relations push from the company.

So what can we learn from the IDI debacle? Investor relations services are more important than ever in the digital media age. In effect, having strong financial public relations in place can allow your investor relations firm to act as a rapid response team.

In the digital age, social media-generated crises of confidence require immediate action. Investor relations services can help prevent a social media spark from turning into a total public relations wildfire. Not only that, but investors relations can help provide a full court press, putting out press releases, communicating with shareholders, and responding to crises as they occur.

Sadly, there seems to be a growing divide between Wall Street and Main Street, in part because many people are skeptical of the stock market following the recession. That's one reason only 52% of U.S. adults said that they or their spouse own stocks of any kind. On top of that, the Pew Research Center reported in 2010 that the wealthiest 10% of Americans owned 80% of all stocks, and experts say that percentage is increasing year after year. Even the middle class is missing out, with just 55% of Americans who earn between $30,000 and $75,000 a year currently invested in the stock market.

Investor relations services can help the public feel secure about their investments when social media claims of dubious origin start a panic. But remember, blog posts, anonymous claims, and social media outrage spread instantly in 2015. You need investor relations services already in place if you want to prevent a small problem from turning into a total crisis.

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