Dealing with a Fickle Wall Street — Play It Straight

Standard

Investor relations today is not a particularly easy business.

This tends to happen whenever market forces turn against investors — and there certainly hasn’t been much to keep them happy over the past 5 or 6 years. These days, every glimmer of a rally is snuffed out in a few days by a nasty decline. It’s hard to make any money, and this has put the investment community into something of a snit.

We see this clearly in the Street’s reaction to the current raft of Q4 earnings announcements. When the results are good, analysts and investors scour the numbers for something bad. A quarter that would normally have been seen as positive news gets picked apart until it starts to bleed.

A big miss, of course, is punished immediately. So much so that stocks gap down, investors flee in a panic and the negative news overwhelms any rational behavior.

So just what do we, the communicators, do about this? There’s really only one answer: Play it straight!

There’s no way to turn chicken salad into Chicken Cordon Bleu in this environment, so don’t try. If the quarter was bad, say it directly, explain why and spell out the steps you’re taking to fix the problem. You’ll still get knocked around, but your management team will start building credibility for the future — as well as establish some interim goals you can announce as you knock them off.

On the other hand, if your good quarter is denied by those looking for any sign of weakness, no matter how obscure, then just continue communicating your positive developments. There’s no way you’ll make progress in a market looking so hard for negatives, so take your lumps, put your head down and work hard to keep building the business. If you are turning in good results quarter after quarter, eventually the Street will take notice.

Not that it ever worked all that well, but hype gets mauled in a market like this. Investors are in no mood to be told stories, and if they sense your presentations are laced with fiction they will lose all faith in management. Once your reputation is tarnished, it’s awfully hard to recover.

Lastly, try to think of your investors as owners — owners that are having an awfully hard time. How many different stocks do they own? How painful is it to sit back and watch these stocks one after another get knocked down on what should be fairly good results?

This is a frustrating environment for everyone, and communicating with the investment community may seem like a thankless task. But don’t lose heart. Eventually, times will change. They always do.

And the investor relations team that has built up credibility with honest and straightforward discourse when times are tough will reap the benefits when market performance improves.

Conference Calls — Some Handholding Required

Standard

Those of us in investor relations are already gearing up for Q4 earnings, and the longest document many of us will work on is the conference call script.

The earnings conference call represents a valuable opportunity to directly reach out to& analysts and shareholders. Practically everyone who cares about the company’s performance will either listen to the call or catch the replay. There’s a lot of pressure to perform, and the quality of management’s prepared comments sets the tone. So the script must make all your key points — and make them clearly.

This is easier said than done.

Conference calls in my opinion are one of the hardest venues for communication. The reason is they are stubbornly linear. Once something is said, it’s gone and you’re off to the next point. If a listener didn’t fully grasp a particular point, there’s no way to know. There’s also no way for that listener to skim back through the text.

That’s why it’s critical to repeat … repeat … repeat. Now, I don’t mean keep hiting your two or three key talking points again and again until they become a bore. Rather, I mean repeat prior points that set up or create the context for a new idea.

Something like this:

“Earnings came in a bit softer than we anticipated due to the delayed launch of SuperProd.

“However, as we said earlier in the call and in our press release, this launch was delayed in order to integrate new features XXX, YYY and ZZZ, which will make SuperProd far more competitive.

“In fact, we expect to see revenue expand 133% in Q1 vs. a year ago based on advanced orders for SuperProd, far greater than we expected. With that in mind, we expect Q1 EPS in the range of …”

Rather than hope listeners recall our earlier reference to the addition of new features — which caused the launch delay and weaker-than-expected earnings — we make sure of it. We hold listeners’ hands through the call. If they don’t get it, we’ve failed.

There are lots of ways to use this technique in practice and I urge you to give them a shot if you haven’t already. With slides you can use a pointer. With press releases, readers can scan back themselves. But on a call, you can only use verbal references like these to guide your listeners through the presentation.