Even a short-lived social media post can put a public company offside of its continuous disclosure obligations, an enforcement case from the U.S. Securities and Exchange Commission (SEC) suggests.
The SEC charged Boston-based gaming company DraftKings Inc. for allegedly violating its rules against selective disclosure when a couple of posts on the social media accounts of the company’s CEO included references to its “really strong growth” in its existing markets — before the company released its financials.
“The content of the posts that DraftKings was ‘still seeing really strong growth in existing states’ was … both material and nonpublic because information about growth during the second quarter in those states where DraftKings had existing operations was not generally known or available to the public,” the SEC’s order said.
The posts, which were published by the company’s PR firm, were taken down within about 30 minutes at the company’s request.
However, according to the regulator’s order, the company “made no prompt public disclosure by releasing to the general public the same information that was in the … social media posts.”
The company didn’t make that disclosure until it released its quarterly results seven days later, the SEC noted.
“Information about growth in sales as a public company can be extremely important to investors. It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors,” said John Dugan, associate director for enforcement in the SEC’s Boston office.
The company settled the charges, without admitting or denying the SEC’s findings.
In settling the case, it agreed to pay a US$200,000 penalty, to cease and desist from future violations, and to ensure that employees undergo training on the disclosure rules.