Q.Our shares have been in free fall for several weeks and I am getting really fed up with being a firefighter rather than a proactive, strategic IR officer. Do you have any suggestions?
A. You don’t say why your shares have been in free fall; either you are in an unfashionable sector, such as TMT, or the reason is company-specific. If the price is a sector adjustment, your strategic proactive nature needs to resurface and establish what exactly sets your company apart from the crowd. Why should you be outperforming the sector? Has the company ever really promoted its best assets or most impressive lines of business?
If the reason is company-specific, then the task will be a greater challenge. By far the most important focus in a crisis is that all stakeholders are treated equally, and identical messages are given to everyone. Form a war cabinet with senior management who have important audiences – treasury, which has banks to consider; HR, which has employees to worry about; and the CEO and CFO. It can’t be too large or nothing will get done, but neither can it exclude people who will be communicating constantly with stakeholder groups. It should meet every morning, including weekends, to come up with a specific solution, be it refinancing, or even declaring bankruptcy. Whatever the specific outcome, the way ahead will be clearer.
Q. My company is heading for a financial crunch. My CEO and CFO are so busy trying to negotiate with the banks that they won’t give the equity holders any time. I dread even answering the telephone because I know it will be somebody requesting a meeting with management, which I will have to refuse. What should I do?
A. Not answering the telephone is a strategy that buys you at most 24 hours of peace. Thereafter, if callers can’t get answers, they will start making things up, and it won’t be in your favor. If your management won’t play ball then insist they authorize you to take meetings in their absence. You should also point out that if the shares become worthless, refinancing would be that much harder to achieve. However, your management will certainly not have time to do endless one-on-ones. Why don’t you organize a conference call with a tight script and limited Q&A? You can control access, and be honest without dwelling too much on the trouble spots.
Q. I can’t believe I am working as an IRO in such tough markets with a company that is struggling to make a decent investment case. I couldn’t be in a worse job.
A. Oh yes you could. Spare a thought for the people doing investor relations at Enron, or Marconi, or Railtrack, or even NTL. Whether a company is in administration or receivership, or just suffering from excess speculation about its financial health, you can guarantee that the IRO has the job from hell.
But tough times can be rewarding. Gundolf Moritz, head of IR at SAP, recently went on record at Investor Relations magazine’s Germany conference in Frankfurt as enjoying tough markets more than easy ones, because the challenge was greater and because it made the distinction between quality companies and others clearer.
Also, memories are short. Think back to as recently as 1998, when Eurotunnel was a basket case and undertook a vast debt-for-equity swap. It had 900 mn shares in issue and virtually all of them in the hands of its creditor banks, plus not a single sell-side analyst covering the stock. Yet it is now a thriving company with 45 percent of its stock in the hands of institutional shareholders and 50 percent privately owned.
The moral of the story is that when you hit rock bottom, there is nowhere else to go but up.
