SEC Staff Doesn't Like "Likes"

By Cydney Posner

This article from the WSJ, "SEC Wants ‘Likes' Linked to Bottom Line," discusses Mary Jo White's recent comments at a PLI conference that the SEC is concerned about the use of metrics such as "likes," "users," or "views" to demonstrate growth potential: "'Our staff's concern has been the impact on investors of the sheer magnitude of some of these metrics.'" The issue is that growth in the number of users may not spell growth in revenues and profits at the same levels. The staff has been focused on these types of metrics in reviewing recent disclosures and, in some cases, "has asked companies to remove details or go back and add more balanced information." According to White, the staff "often questions what percentage of users are paying customers, and whether the company has found a way to turn users into paying customers….'It can be hard not to think that these big numbers will inevitably translate into big profits for the company….But the connection may not necessarily be there.'"

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