Learn how our Investor Relations Firm promotes trust and strong relationships with shareholders:
Investor Relations (IR) Communication is a core competency of our firm. As an investor relations firm we specialize in financial communication strategy, risk analysis, and financial communication vetting.
As quarterly earnings approach, your financial team agrees, its a blockbuster quarter. Not only a blockbuster quarter – you are raising full year guidance – and you know your investors will be pleased. You have prepared your teleconference slides, commentary, and communication strategy. Your confidence grows. You are proud of your company’s accomplishments and confident in the direction your company is growing.
All potential questions have been vetted by your internal investor relations division. Nothing can go wrong, you beat expectations on the top and bottom lines, raised forward guidance, and produced exceptional year over year growth. Your shareholders will be pleased, your stock is going higher. Not all companies are so fortunate to be in this position. Those that are can still make one misstep in response to an analyst's question, which sends your stock into a downward tailspin. Sound unrealistic? It should not, and certainly was not the case for one social media giant in 2013.
Our investor relations firm promotes investor trust, resilience, and sound financial communication strategies
C-Suite executives are in demanding positions, which require bold and decisive communication during highly sensitive times. Frequently, investor related strategies are not vetted adequately, and the results are catastrophic. On October 30, 2013, social media giant, Facebook (NASDAQ: FB) released the company’s fiscal third quarter earnings statement and initiated the standard analyst conference call shortly thereafter.
Since Facebook’s debut on the NASDAQ, the company has overcome an IPO nightmare, which resulted in extreme trading volatility with shares exchanged between $18.87 and $54.83 each. In a quarter where Facebook executed its monetization strategy flawlessly, earning total revenues of $2.02 billion and an adjusted EPS of $0.25, the company was firing on all cylinders. Facebook reported astonishing non-GAAP earnings north of 100% compared to the sampe period year prior. Earnings more than doubled and the company’s stock trajectory seemed slated. Shortly after the earnings release and prior to the earnings call, the stock traded 5% above its previous close.
The company delivered solid growth to shareholders significantly exceeding analyst expectations. Once the earnings call began, Mark Zuckerberg, Facebooks CEO, delivered a powerful introduction to the earnings data, citing the company’s goal of bringing the “next five billion [people] online and into the knowledge economy.” Zuckerberg elaborated, that by connecting and understanding users, Facebook can grow its vast knowledge base thereby allowing users to participate in Facebook’s so called knowledge economy.
Sheryl Sandberg, Facebook’s COO and Director, enlightened investors with more positive data points. Facebook users engaged with the platform more than YouTube, Pandora, Yahoo!, Twitter, Pinterest, Tumblr, AOL, Snapchat, and LinkedIn combined." The astonishing growth story is well intact; the company's cross platform monetization strategy is flawless. "The future growth prospects are promising [for Facebook] with plenty of room to run," one analyst commented following the opening statements.
The company’s stock rose 12% in after-hours during the initial comments from Zuckerburg and Sandberg confirming investor confidence in the reported data and positive comments from Facebook's executives.
Then something happened
When David Ebersman, Facebook’s CFO, opined that a reduction in teen engagement might be on the horizon, the stock began to tumble. According to Ebersman, “[Facebook’s] best synopsis on youth engagement in the U.S. reveals that engagement with the Facebook platform among U.S. teens was stable from Q2 to Q3, [however] we did see a decrease in daily users specifically among younger teens.”
While this seeming factual disclosure was in the best interest of transparency, corporate responsibility, and shareholder interest, it's important to note that the seemingly benign comment was made without a single question from the analyst community. In the weeks preceding Facebook's quarterly earnings statement, many analysts presented concerns about "teen engagement." Simply stated, analysts were critical of how frequently teens were using the social media platform. The concern was whether Facebook could remain relevant with younger users.
Ebersman deployed a strategy of preemptive conditioning, a methodology used to reduce the impact of issues known, by addressing them prior to being questioned about them.
Why Ebersman’s preemptive communication strategy failed
Preemptive vs. reactive communication, or in this case, question and response strategy, contemplates knowing precisely what question will be presented. Once your business intelligence division determines those facts, communication is then deployed to address the question or concern, in an effort to modify a belief or change a behavior, subsequently mitigating the negative impact the concern may cause.
In this case, Ebersman addressed a valid concern from the analyst and investor community, regarding Facebook's relevance among teen users. The question within the analyst and investor community was related to teen engagement. Ebersman attempted to preemptively address an assumed question - could Facebook maintain and grow teen engagement at previously reported levels? When addressing the concern, Ebersman and his advisors made a critical error. Following Ebersman’s initial comment, and after a parabolic move downward in the stock's afterhours trading, Ebersman elaborated on his comment by passively mentioning that the data was "questionable" and “lack[ed] precision.”
Ebersman’s disclosure was improperly ordered and resulted in significant erosion in Facebook's market capitalization, reflecting loss of shareholder confidence. The preemptive strategy, based on questionable and unreliable data concerning teen usage, was counter intuitive when balanced with statements made by Director Crawford. While investors require a certain degree of transparency, transparency must be balanced with prudence. In this case Facebook itself questioned the statistical reliability of data concerning teen engagement.
Had Facebook fully vetted the investor focused communication and considered the psychological ordering of a more strategic disclosure, investors could have received a much different message.
How we help with investor relations communication strategies
LIQUID'S investor relations team is comprised of market savvy communicators from diversified backgrounds. We reinforce corporate financial positions promoting investor confidence and trust. In an environment where activists mount assaultive campaigns and investigative reporters probe for information, a single news piece can change a stock's momentum, erode investor confidence, and cause significant short and long-term damage.
We solve these problems by creating strategically focused investor communications that reinforce factual representations of data and prepare corporate executives to answer the most difficult questions. We help executives discover new ways to communicate corporate positioning, financial data, and corporate information that reinforces investor confidence and promotes corporate resiliency.
We're always ready, day or night, to deliver the best strategic communication advice to your company or organization.
Good forecasting is accurate, timely and reliable. We get to the heart of what's at stake fast to help our clients predict important outcomes and see a fuller range of strategic options.