Two social media posts from DraftKings CEO Jason Robins in July 2023 crossed the line when he opined about his company’s financial growth a week before an earnings call. The matter has recently been resolved after the company agreed to pay a fine levied by the Securities and Exchange Commission.
Share to One, Share to All
Corporations routinely use social media to discuss a variety of subjects, but there are clear boundaries as to what financial news they can share with the world and where they can share it. DraftKings CEO Jason Robins has found this out the hard way after his company was slapped with a $200,000 fine by the SEC for two posts made on his LinkedIn and Twitter accounts.
The post that drew the attention of the SEC happened shortly before an earnings call on July 27, 2023, when Robins posted the following:
“There’s massive potential for growth in new markets—but we’re still seeing really strong growth in existing states.
“Our 2018-2019 state vintage grew over 80% on the revenue basis year-over-year in Q1. With those numbers, we expect robust growth even without new states opening.”
DraftKings’ legal department may have become aware of the transgression, as the post was deleted within 30 minutes, but because it had gone public and was not shared specifically with investors via whatever method DK’s corporate news is supposed to be disseminated to shareholders per the company’s filings with the SEC, it was in violation of that agreement.
Neither Twitter nor LinkedIn was designated as one of those information vehicles in which investors can be informed of corporate financial news, which caused the ruckus.
“Information about growth in sales as a public company can be extremely important to investors,” said John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
The Ruling
The wheels of justice move slowly, and it was recently reported that DraftKings was fined $200,000 by the SEC for Robins’ social media post.
“According to the order, even though Regulation FD required DraftKings to promptly disclose the information to all investors after it was selectively disclosed to some, DraftKings did not disclose the information to the public until seven days later when it announced its financial earnings for the second quarter of 2023,” according to the ruling.
Had DraftKings designated one or more of its social media accounts as a venue for investors to receive information on the company’s financial prospects, the post would likely have adhered to the rules stipulated by Regulation FD, or Fair Disclosure, which requires nonpublic material be made available to everyone at the same time.
The SEC implemented the rule in 2013 after social media became so pervasive that companies can use their social media pages as company pages, but only if investors are made aware that the platform has been designated as such.
The rule reads, “Moreover, we emphasize that the Commission’s 2008 Guidance, though largely focused on the use of websites, is equally applicable to current and evolving social media channels of corporate communication. The 2008 Guidance explained that issuers must take steps sufficient to alert investors and the market to the channels it will use for the dissemination of material, nonpublic information.
“We believe that adherence to this guidance will help, with minimal burden, to assure compliance with Regulation FD and the fair and efficient operation of the market.”
“DraftKings is pleased to have this matter resolved,” said a DraftKings spokesperson.
