Restoring the Faith in Messaging

The announcement of Pope Benedict XVI’s resignation just before the start of Lent season comes as a shocking surprise to the world.  Depending on how “resignation” is defined and how the Holy See’s records are interpreted, as few as four and as many as 10 popes have renounced the Papacy.

ALTERNATIVE TEXT

Pope Benedictus XVI (Photo Credit: wikipedia.com)

 
The last pope that resigned was Pope Gregory XII in the early 1400s, and like his predecessors, Pope Benedict’s resignation is sprinkled with controversy. So, how does the Vatican respond to such unprecedented news?
 
The Vatican’s semi-official daily newspaper is L’Osservatore Romano, and so far it is gearing its coverage toward restoring readers’ faith in the Church by emphasizing that the Pope’s resignation is conquerable and recoverable.
 
The newspaper’s coverage hammers three central points: the Pope’s resignation is a difficult and regretful decision but made for the greater good; the Pope’s character is that of courage and humility to admit his
inability to stay in his position; and the Church will recover from all of this.
 
Rather than focusing on the fact that the Pope is leaving his position, L’Osservatore Romano draws
attention to the Pope’s character, calling him courageous and humble for being so honest.  And despite the social lashing the Catholic Church has received in the media, the Vatican’s messaging isn’t defensive, but supportive and positive.
 
Consistency is key in the Vatican’s messaging, particularly at a time when a lot of people are looking to the Holy See for a resolution and a way to restore order.  In fact, the messaging has been so consistent and effective that it is positioning the Pope’s resignation as an opportunity for change and a restoration of faith in the Church.
 
The Vatican’s approach serves as a good example that it is not enough to communicate what will be done to fix a situation, but rather it is how a message is communicated that determines whether the message can restore people’s faith.

 

Joanne Sibug, jsibug@pondel.com

Cashtag Blues

Last summer, with relatively little fanfare, Twitter added clickable stock symbols to its tweets.
This is how it works: Add a “$” in front of a ticker symbol in Twitter’s search box and you’ll be able to engage in conversations about a particular company, similar to what would happen with a hashtag “#” followed by the name of your favorite pop star.

twitter
In social media circles, introducing the “cashtag” is yet another way to stimulate chatter among people
who are interested in a particular topic, such as public companies. But like all seemingly helpful social media tools, the cashtag may, in fact, send your stock tumbling down in 140 characters or less.  We recently observed such a scenario.

Shortly after market open on an otherwise average trading day, an anonymous tweet began surfacing about an FBI raid on a certain public company.  Soon the company’s trading volume began rising and its shares began
dropping, so much so that, as IR representatives for the company, Bloomberg called us to find out if the rumors on Twitter were true.  We confirmed that the rumors were false, and soon the stock corrected itself.

We later learned that the SEC opened an investigation on the tweeter for a possible “10b-5” infraction, which is when someone makes fraudulent claims in connection with the purchase or the
sale of a security.

Rumors surrounding public companies have been swirling about the Internet long before the cashtag, but this example serves as an important reminder that new information channels, carrying potentially market moving information, are reaching influential audiences at light speed.  And that means the onus will increasingly fall on investor relations professionals to ensure chirping birds are not making fraudulent claims.

 

Evan Pondel, epondel@pondel.com

Iran Sanctions Affect Public Companies

It’s a little disconcerting when you think about it, but interesting nonetheless how politics and the world order is infiltrating corporate life.

Iran Elections

Iran Elections (Photo Credit: Flickr: bioxid)

 
This month, public companies must begin reporting–in quarterly and annual reports to the SEC– transactions that they or any of their affiliates have with Iran.  In turn, if such a report is filed, a federal investigation will be triggered.
 
The new mandatory reporting requirement stems from passage last year of the Iran Threat Reduction and Syria Human Rights Act of 2012, signed into law in August by President Obama.  The website www.govtrack.us called the Act a strengthening of Iran sanctions “for the purpose of compelling Iran to abandon its pursuit of nuclear weapons and other threatening activities.”
 
Previously, the SEC’s Office of Global Security Risk was charged with monitoring public companies’ activities that could relate to any of four countries–Iran, Syria, Sudan and Cuba–designated by the State Department as “sponsors of terrorism.”  Now, issuers are required to make active disclosures relative to Iran, rather than merely respond to SEC inquiries.
 
The major news outlets haven’t said too much about the new Act, which, granted, will impact only a relatively small percentage of the thousands of public companies–mostly shippers, financial institutions,
insurers and reinsurers. Nevertheless, how such companies ultimately communicate their Iranian transactions and the ramifications on their stock prices and customer reactions will be fascinating to watch.

 

Roger Pondel, rpondel@pondel.com

To Guide or Not to Guide

Should companies provide financial guidance to the investment community?  That is the age old question, at least in investor relations circles.  Ask 10 CFOs and you’ll probably get 10 different answers. Add 10 IROs to the mix and now you’ll likely have 20 different answers.  As usual, there is no one size fits all solution.
 
A Skadden, Arps alert debated the pros and cons.
 
Pros:
 

  • Gives analysts reliable data points from which to assess their own projections.
     

  • Reduces investor uncertainty.
     

  • Potentially averts trading volatility.

 
Cons:
 

  • Encourages short-term thinking.
     

  • Creates disclosure issues.
     

  • Distorts investors’ perceptions.

 
Chad Stone, CFO of Renewable Energy Group, told CFO Magazine that “Offering an indication of our expected performance creates an opportunity for investors and analysts trying to understand and model our business.”  He believes that the absence of quarterly guidance would make it difficult for the investment community to understand how his company will perform.
 
Stone is not alone.  A survey by the National Investor Relations Institute found that more than three quarters of those who responded continue to provide
financial guidance.  Of those, 37 percent give quarterly earnings guidance and 39 percent give quarterly revenue guidance.
 
On the other side of the debate, Diane Morefield, CFO of Strategic Hotels & Resorts, believes that quarterly guidance is too short-term focused.  “I would simply hate being boxed in by guidance every three months,” Morefield told CFO Magazine.
 
Many NIRI members agree.  The number of companies providing some type of financial guidance has fallen from 81 percent in 2010 and 85 percent the year before.
 
As a big proponent of transparency, and making it as easy as possible for the investment community to understand your business and financial expectations (especially true for micro-cap companies), I am firmly in the guidance camp.  Whether it’s a revenue range for the quarter or year, point guidance for EPS, or a qualitative discussion of the trends likely to impact future performance, some information is better than none in getting stakeholders on the same page and managing expectations.

 

Laurie Berman, lberman@pondel.com