By Jeffrey Goldberger, Managing Partner, KCSA
As the clock struck midnight last week ushering in the New Year, many hoped for a successful start to 2016. Fast-forward to the first day of trading for 2016 and those hopes were quickly dashed. With negative news coming out of China and oil prices continuing to tank, the Dow Jones Industrial Average was down as much as 467 points, before rebounding (if you can call it that) to being down 277 points when the markets closed on January 4th. As we wrap the week, the market roller coaster ride continues. Thursday was brutal as the Dow sunk 392 points.
So much for a positive start to the year!
With the market in flux, it’s imperative for publicly traded companies to formulate an effective communications strategy so as not to cause current and prospective investors to run for the hills.
In times of uncertainty, I recommend that publicly traded companies develop a comprehensive, road map to direct their communications efforts with shareholders. While the natural inclination for many is to bury their heads in the sand during times of uncertainly, I recommend the opposite; I suggest that during such periods, companies should communicate with shareholders as often as possible – through as many channels as possible. Communicating new contracts, product introductions, alliances, contracts and key hires are just some of the ways a company can reassure investors that its business is progressing positively. At the same time, companies need to be aware that the way in which investors consume news is constantly evolving. Whereas the communications channel of choice has historically been the tried-and-true press release, additional avenues such as Tweeting, blogging, podcasts and the like, allow companies to cast a wide net and deliver compelling messages to the broadest audience possible.
It is also important for companies to provide useful insight into their business and describe how they have effectively positioned themselves to weather economic factors outside their control. In the current environment, for example, it would be important for a U.S. manufacturer of automotive parts to inform customers that a majority of their sales are domestic and that they have very little exposure to China. Conversely, it would be equally important if the aforementioned company had outsized exposure to China to describe what they’ve done to reduce their exposure over the short- and long-term to a single geographic market.
The truth of the matter is we live in a global economy, whereby something happening on the other side of the world has the potential negatively impact a company. Sometimes the threat is real and sometimes the threat is perceived; regardless of orientation, it is incumbent upon management to view all threats, real or perceived, as one in the same. As we have often seen, rumors or perceived issues can wreak havoc on a company’s stock. To combat rumors and the like, management also needs to institute a comprehensive ‘listening’ program – actively monitoring social media discussions, stock message boards, water cooler chats within and outside the organization, as well as maintain an active dialogue with key members of the buy- and sell-side community. Constantly taking the pulse of the broader market will enable management to quickly respond to threats and effectively manage the flow of information regarding the company.
While no one or no company is completely immune to the unpredictable and rocky global markets, following these simple recommendations to effective communications will help you weather the storm.
Happy New Year!!!