...

Glenn Curtis of Thomson Strategic Research Services discusses what companies can and should do to deal with a major stock blowup

Transcript:
Good afternoon. My name is Glenn Curtis. I am a Director in Thomson Financials Strategic Research group. -- the New York office.

Today I am going to talk to you about a report that I disseminated earlier this year called: "What to Do When Your Stock Blows Up." Essentially the report delves into what companies can and should do to deal with a major stock blowup, to rebuild investor confidence, and to firm up their share price. The report also contains a survey Thomson conducted to gauge how public companies have historically responded to one or multi-day drops in their share price.

With that in mind, exactly how important is the issue of crisis communications, and being able to respond to a major adverse event?

According to our survey 92.5% of respondents indicated that within the past 5 years their company's stock has experienced a large one or multi day collapse. Almost 68% of respondents indicated that the value of their stock declined between 10% and 40% at that time.

That's pretty significant!

So what is the best way to respond to a stock collapse?

Obviously, every situation is different. However, there are some general rules of thumb...

For example: The first task should be to 1) Identify the source of the problem.

2) Craft a response to the problem. - That means consulting with the legal department, and the IR team to make sure that what is being said is appropriate and won't create any other problems for the company. Next ---

3) Communicate the response to the public and the investment community. Of course however, before doing this a determination must be made as to the appropriate vehicle for the message (for example, a press release, 8-K etc.)

Also scheduling one-on-one calls/visits with major shareholders is important as is setting up investor conference calls, and scheduling follow up calls as needed.

Also, if necessary, notify the stock exchange, SEC/NASD, or other regulatory bodies of the event. And consider making improvements to the company's website to better reach the retail investor.

The next logical step should be to Play Offense

And that means that within 1-2 days of the event, reach out to major equity and debt holders.

Also, as soon as possible, contact market makers and specialists, or the equity capital markets desk of the company's investment bank to learn more about the origin of selling pressure.

Within 1-2 weeks be sure to identify and reach out to potential institutional buyers of the stock. Also, consider setting up a formal road show to tell the company's story..

5) Finally, Establish A Plan to Deal With Future Scenarios.

For those wishing to view an executive summary of this report or executive summaries of other reports that Strategic Research has disseminated please go to the Corporate Services Center at www.thomson.com/financial/CorporateResources


Again, my name is Glenn Curtis with the Strategic Research Group. Thank you.

<< Back to article