One of the biggest challenges facing public companies is how to respond when blindsided by an unexpected article, research report or blog post questioning their business.
With no widely accepted playbook for how to respond to investor attacks, public companies are choosing to address allegations in different ways.
One of the most effective recent responses came from Focus Media (ticker: FMCN).
After research firm MuddyWaters released a scathing report, Focus responded by (a) issuing a number of press releases rebutting the allegations, (b) conducting a lengthy investor conference call, (c) buying back stock, and (d) taking to China’s Twitter service to allay concerns.
As a result, the stock recovered.
Today, when attacked, public companies’ first step has been to issue a press release.
Some companies use that press release to respond respectfully -- demonstrating that they’re taking the allegations seriously. (EDU)
Other companies use that press release to attack short sellers as a whole in an effort to discredit the source. (OMEX)
Others simply conduct “special” investor calls to discuss their business with barely a mention that the company is under attack. (OPK)
And, in some very rare instances, companies ignore the attacker outright and instead use interviews to spread their message that everything remains in good shape. (OPK)
Ultimately, however the press release is the key starting point.
Most every company follows that initial press release with a public conference call due to the volume of investor inquiries.
You rarely if ever see a public company going directly to its attacker’s blog or site and posting a response.
For it’s obvious to public companies that such a move doesn’t scale their message as does a press release disseminated through Yahoo! Finance quote pages.
With resources limited IR pros are wise to recognize that such a move simply doesn't make any sense.
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