In our two recent articles, available here and here, we outlined how social media can influence proxy contests and identified some potential legal challenges with this development. This update focuses on the recent use of social media in the high-profile (failed) hostile bid for Syngenta AG ("Syngenta") by Monsanto Company ("Monsanto").
In May 2015, Monsanto made a $45 billion bid (its third bid in four years) for Syngenta. Syngenta's board almost immediately rejected the offer on the grounds of anti-trust concerns and lack of protection for shareholders should the deal fall apart. The rejection did not end Monsanto's pursuit and through a series of bids, the last of which was withdrawn in late August, Monsanto continued to seek support for its bid.
Syngenta's Use of Social Media
On June 22, 2015, in response to Monsanto's bid, the Chairman of Syngenta, Michel Demaré, explained the Board's position on the proposed merger in a YouTube video. In a one-on-one interview, Mr. Demaré responded to questions about the details behind the Board's decision to refuse Monsanto's offer, including concerns about the "huge execution risk" and the interests of Syngenta, its stakeholders and its shareholders.
Syngenta tweeted the video three times on the date of its release to its more than 53,000 followers, as well as on each of its respective regional twitter accounts, each with equally large followings. The company was not alone – comments relating to Syngenta and Mr. Demaré's video were tweeted and shared by a diverse range of users, from major media outlets to small town agronomists and farmers.
The video has received over 16,500 views and the knock-on social media effect carried Mr. Demaré's message to a far greater audience. For example, Twitter users from across the world commented on and shared the video:
- @W_Boerger, a self-described agriculturalist from Greensboro, North Carolina, shared the video and noted, "Video interview: #Syngenta Chairman comments on Monsanto's recent approach";
- @toniaracre, whose profile notes that he is the Director General of Syngenta LATAM [Latin America], shared the video and noted, "#Syngenta Chairman says Monsanto is 'trying to buy it on the cheap'";
- @stevenrobbens, a user located in Gent, Belgium shared the video;
- @Marc_Maret, from Baden and CEO of Infocentric Research, noted, "Great video interview from #Syngenta Chairman's on Monsanto's proposal and its huge risks and unfair pricing" in sharing the video;
- @NCSmallBiz, a North Carolina account run by Samantha Routledge to promote a small business and entrepreneurial community in North Carolina, referencing an article that summarized the video, noted "#Syngenta rebuffs latest offer from #Monsanto, saying company 'significantly undervalued'";
- @BloombergGeneva, Bloomberg's Geneva bureau, noted "#Syngenta Chairman Says Door is Open to 'Full and Fair' Offers"; and
- @FinSentS_Eur60, an account self-described as for "stock sentiment analysis on European markets" noted, "Syngenta Chairman Reaffirms Monsanto Approach Not In Company's Best Interest #SYNGENTA AG."
Additionally, the video appeared and was discussed on numerous high profile websites with substantial readership, including the websites for the New York Times, Agri-Pulse, Reuters, Business Insider, and Farm Progress.
In our previous articles on using social media in proxy contests, we outlined several relevant legal considerations. Many of those apply to using social media in a contested M&A transaction. Three main concerns worth outlining are misrepresentation (secondary market liability), selective disclosure and defamation.
As with traditional media, parties should carefully consider the accuracy of the information shared on social media. Care must be exercised to ensure that the information on social media contains no untrue statement of material information and does not omit to state material information that is required to be stated or necessary in order to make any other statement therein not misleading in light of the circumstances in which it was made. If proper care is not taken, liability for misrepresentations on social media can result if an investor trades in the company's securities.
2. Selective Disclosure
In Canada, social media cannot be used as the exclusive means that companies use to communicate with shareholders. Material information must continue to be filed and disseminated through traditional channels and even information that appears non-material must be vetted to make sure that nothing material is being disclosed that has not already been filed on SEDAR and which has been released generally to shareholders in a press release, material change report, circular or similar document.
National Policy 51-201 requires that material information about public companies be "generally disclosed." For information to be generally disclosed, it must be disseminated in a manner calculated to effectively reach the marketplace and investors must receive a reasonable amount of time to analyze the information. The opposite – "selective disclosure" – occurs when a company discloses material information to a limited group of stakeholders (such as the media, analysts, institutional investors, other market professionals, or, for example in the social media context, via a tweet to the subset of its shareholders that use Twitter) and not broadly to the investing public. The regulatory concern is that selective disclosure undermines confidence in the marketplace by potentially creating unequal access to information and opportunities for insider trading.
In our view, the risk of selective disclosure in this context can be mitigated by using social media to promote material information already disseminated via traditional channels. This is consistent with the approach taken by Syngenta.
As parties become comfortable using social media to promote their position and, correspondingly, to attack the other side's record, they should bear in mind that social media, like traditional media, can form the basis of a defamation lawsuit.1
We expect participants will increasingly use social media to influence contested situations, whether in proxy contests or contested M&A transactions.
Syngenta's savvy use of Mr. Demaré's video provides another high-profile example of effectively using social media in a contested situation. Social media platforms allowed Syngenta's video to reach audiences far beyond those typically serviced by normal corporate disclosure mechanisms and traditional media. Moreover, the cost of disseminating the video to stakeholders was likely negligible in comparison to more traditional lines of communication.
Participants in a contested situation should seek legal advice before harnessing the power of social media to their advantage. With a defined strategy that addresses the various legal issues involved – such as the concerns of misrepresentation, selective disclosure and defamation discussed above – it is possible to make effective use of social media while minimizing the legal risks of doing so.
1. In Canada, the plaintiff bears the onus of proving three things:
(1) that the impugned words were defamatory, in the sense that they would tend to lower the plaintiff's reputation in the eyes of a reasonable person;
(2) that the words in fact referred to the plaintiff; and
(3) that the words were published, meaning that they were communicated to at least one person other than the plaintiff.
If these elements are established on a balance of probabilities, falsity and damage are presumed. After those elements are established, the onus shifts to the defendant to raise a valid defense. See Grant v Torstar Corp., 2009 SCC 61,  3 SCR 640 at para 28.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.