Is your social feed acting like nothing is happening in the world?
If you’re a public company that hasn’t yet factored in the coronavirus and covid-19, it’s probably time to think about your strategy.
As the stock traders say: it’s risk on.
Growing up in Vancouver, we always had earthquake drills. Thankfully, the big one never came. But were we ever prepared!
Years later, there was a different sort of quake: the great financial crisis of 2008.
Deja Vu Doo Doo 💩
It’s not every day that a global event grips television audiences and social media feeds for weeks on end. In fact, it’s pretty rare. But when global stock markets react in unison, you know you have the makings of a black swan event.
So far, all signs point to one thing: things are going to be rocky.
But is this just a tremor? Only time will tell, but while you still have time, here’s how to get prepared.
Prepare While Thee Can
So far, most public companies on Twitter are ignoring the reality that a pandemic of unknown size is about to take an even greater hold of household conversations and the public’s imagination.
The key word here is “unknown.” While we do not yet know the ultimate size and scope of the coronavirus, if you are an active social media user you have seen the dozens of animations and computer models placing this virus in a league of its own.
Retail investors with billions invested collectively recognize there are a lot of smart people on Twitter, including the world’s leading researchers and research organizations tweeting alongside some of the very best financial minds.
So when they saw a very popular financial Twitter account banned for tweeting about the origins of the coronavirus, it sent up emergency flares.
Twitter is usually pretty chill, but this move was like banning a studio summer film because it is too violent. Now everyone wants to see it.
With social media providing a never-ending, up-to-the-minute stream of information on a topic that affects so many people, you might as well participate willingly.
Because like it or not, your public company will participate, even if it is unwillingly.
I say unwittingly because right now your social data is being sucked up and analyzed by trading algorithms, responsible for executing sell orders and options trading strategies.
How you respond now may dictate how fast you come back later.
The big risk is that the investor has more information than you. Or different information. That is their job; to figure out what is really happening. You want to be in agreement on the key value drivers.Steve Yanor, Managing Director
Those that experienced the great collapse in 2009 know to be prepared when scenarios like this arise. We have seen meltdowns happen. And they happen fast.
It is impossible to predict the future, but one thing you can be sure of: it is the job of the very best investors to know the future — or at least to model the future — better than any government agency that communicates with the public.
This is why you continue to see new down days and I expect you will see many more as institutional investors seek to better quantify the contours of risk and make disciplined exits into other asset classes where capital is safer. Being an equity security is no fun right now.
But maybe it is time to buy?
Now is the time when you, as an executive at a public company, must achieve the goal of reducing uncertainty with respect to your operations to the greatest possible extent.
Now, take the mantle and lean in.
Fact Number One
This thing is happening. View it for what it is: an external event beyond your control. You’ll probably miss earnings; maybe by a lot. Only you know by how much but you may want to schedule several update calls and build in a big discount up front so you don’t have to keep going to the market with revised models that expand as more information is known.
Look. Investors recognize this is coming out of left field. But they also expect you to deal with it.
If the information you are receiving about the coronavirus is based on another authority, make sure you say so. And be sure to monitor your primary source frequently.
You can take advantage of the fact that there is nothing you can do except to protect your employees and your long term interests. You should take advantage of the fact that everyone is in the same boat.
Now is not the time to sugarcoat things; no one is in the mood for that.
People are fearful and they are likely to get more fearful as this pandemic starts to spread in familiar communities, even if those communities are far away on television.
Take the Hit
If you are directly impacted by the coronavirus in any way, you may take a big hit. If you’ve already taken a big hit, there is probably another one coming. Sorry. This is a fact of life.
Research shows the bigger hit you take up front with your forecasts, the less value you will lose over time. You will want to be realistic about your forecasts; recall that at the end of this your investors will judge you on how you communicated. Your crisis management may be the sole reason they choose to return.
The one thing you must avoid is: you knew about this and you didn’t tell us?
Give investors specific periods when you will return with regular updates (every two weeks or the end of every month). Communicate that the update will be as comprehensive as possible and will include forecast revisions as they are appropriate, based on your best available data.
Specificity provides valuable information for investors of all sizes. People are less likely to be sellers when an update is ahead, and more likely to be buyers if a revision is upward. This is the reason you build in a big discount up front.
Equity is a dangerous place right now. Investors of all sizes are trying to figure out where to move their money. Thinking ahead, it may be a long time until you are able to tap the equity markets. Plan accordingly.
Don’t forget lives are at risk and being lost. Compassion, respect, sorrow, vigilance — these are the qualities you want to exude as you communicate, especially on social media.
This situation has reached a point where it is time to adjust the content on your social feeds or risk seriously harming your corporate brand. What if your competitor takes a compassionate defensive posture? How’s that going to make you look?
There is no doubt that the markets will again return to their healthy and exuberant state of early January 2020, but until then, this period represents an opportunity for management teams to strengthen their corporate brands. Now is the time when reputations are built.
You’ll make up the market value down the road (and then some) if you do what’s right now.