Regulator examines viability of social media for promoting IPOs

by |
Allie Sanchez

The Australian Securities and Investments Commission (ASIC) recently released a report that examined the marketing practices used to promote initial public offerings (IPOs), and found that social media is emerging as a “creative and innovative” tool for issuers and brokers.

A review of the ASIC report by Simone Collignon, senior associate at Dibbs Barker said that “social media has the potential to be an effective marketing tool for IPO brokers and issuers. The trick is to strike the right approach to ensure your social media marketing efforts are not only legally compliant, but also worth your while.”

Collignon further noted that ASIC suggests that smaller firms are addressing the risk of not achieving spread or minimum subscription amounts by using social media, which is “a relatively cheap way of mitigating the risk of an IPO falling over.”

“However, doubts remain as to whether social media marketing is truly effective at converting potential leads to dollars,” she continued, citing that its use remains limited among issuers and brokers.

For firms that want to dabble in this nascent tool, she gives this advice, “Companies considering an IPO or brokers looking for creative ways to engage with potential investors should consider whether social media is likely to be effective in their IPO campaign. If the answer is 'yes', then it's crucial that every LinkedIn post, Facebook ad, tweet, share and 'like' complies with the letter and spirit of the law.”

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