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Facebook Inc (FB) and Twitter, Inc. Rewrite the Rules for Investors

After setting another record high yesterday, stocks are moderately lower this morning, with the S&P 500 (INDEXSP:.INX) and the narrower, price-weighted Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) down 0.46% and 0.32%, respectively, as of 10:05 a.m. EDT.

Follow-up: Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), and Vodafone Group Plc (ADR) (NASDAQ:VOD) Yesterday’s column highlighted reports that Verizon and AT&T are preparing a joint bid for Vodafone. Verizon ultimately squashed that speculation on Tuesday with a statement that it does not “currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others.” Under U.K. takeover law, the statement now prevents Verizon from bidding for Vodafone for six months, unless Vodafone’s board agrees or recommends an offer or a third party attempts to acquire the company.

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Yesterday, the Securities and Exchange Commission ruled that companies can distribute material corporate announcements — including quarterly earnings data — on social-networking platforms such as Facebook Inc (NASDAQ:FB) and Twitter, Inc.. The SEC made at least one stipulation for this new information-delivery channel: Companies need to make shareholders and investors aware of which platforms they intend to use.

Facebook Inc (NASDAQ:FB)

The ruling resulted from a fracas last July in which Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings disclosed on his personal Facebook Inc (NASDAQ:FB) that in June, monthly usage on the movie-viewing platform had topped a billion hours for the first time. Netflix had made no formal announcement prior to Mr. Hastings’ post, and the concern was that it may have violated fair disclosure rules. In announcing its ruling, the SEC also said it would not pursue legal action against Mr. Hastings.

On the face of it, I think this ruling is positive in that it simply brings regulation in line with the technology available in the current “information market.” Tools like Twitter and Facebook Inc (NASDAQ:FB) contribute to information flow and market efficiency. While this may have consequences for algorithmic traders, the impact on long-term, fundamental investors is small to zero; indeed, the latency between any two data platforms is typically insignificant relative to the time it takes to assess the long-term implications of breaking news. Here’s the bottom line in less than 140 characters:

You’ll earn your returns over a period of years; a few minutes or hours won’t matter. #longterminvestor

The article Facebook and Twitter Rewrite the Rules for Investors originally appeared on is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can find him on LinkedIn. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook.

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