You probably remember Facebook’s initial public offering.
Not only was it widely regarded as a disaster (even though Facebook recovered), it was also a major talking point in lots of stories about Twitter’s IPO. Would Twitter’s offering be as fraught with difficulty as Facebook’s? They’re in the same industry, so it stood to reason, right?
Being on the “firing line” many times over the years, we’ve noticed the following trend in investor/financial public relations: A major financial organization (Entity 1) encounters a big problem. It maybe even goes out of business. Investors, counterparties and/or industry partners are harmed. The financial media might have reported a little about the problem beforehand, but after the bad news breaks, they are all over the story.
A little later, a second entity (Entity 2) begins to have a problem that appears similar, but is nowhere near as bad. The media, however, see it as their job to report the possibility of another blowup.
The negative news causes industry partners to reduce or abandon their business with Entity 2. Subsequent media reports lead to another cycle of industry counterparties/partners changing their relationships, and perhaps even government officials or regulators taking action against Entity 2. One media outlet breaks “new” news about Entity 2’s problem, and then another quickly adds a different angle.
If Entity 2 has publicly traded instruments, any price declines become fuel for the fire. Eventually, it reaches the point where Entity 2 really does have to go out of business or radically restructure.
Throughout this process, Entity 2 is slow to react. Management is perplexed.
“Why is the financial media giving us all this negative attention?” they ask. “Our problems are nowhere near as bad as Entity 1’s. If only someone would report the facts.” Unfortunately, by the time management acknowledges they have a major problem, it may be too late.
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What should an organization in Entity 2’s position do?
1. Act immediately: The moment the media starts focusing on your firm, get management to act now or the problem will only get worse. Management is likely to resist, hoping the problem will go away. But that’s wishful thinking.
2. Change the story: You can’t simply tell reporters they are wrong. You need to marshal all the facts so there is no denying your position. Chances are the media may be partly correct. If so, your firm needs to change the paradigm. Management needs to do something meaningfully different to move the story from a focus on the problem to a focus on the solution.
3. Get your message out everywhere: Major financial media outlets aren’t your only option. Nowadays you can tell your story through all the new digital media available. You can post information on websites, blogs and Twitter/Facebook; email it directly to customers, prospects and the media. Use this information to engage with the media and other major constituencies.
After an Entity 1 blowup, it is very easy for an Entity 2 to think they won’t be affected, especially if its problem is smaller or different. From the financial media’s point of view, Entity 2 may be the next crisis. If company leaders understand the “You’re Next” syndrome, however, they stand a fighting chance to defend themselves by acting proactively to keep the story from getting out of control.
Gary Fishman is a managing director at Anreder & Co., an investor and public relations firm. Also contributing to this article were Steven Anreder, Michael Wichman, and Andy Ginsberg.