Investor Relations 101: Don’t bury the bad news

Frequently companies seeking Investor Relations support, especially those in the nano-cap range, expect “enhancement of shareholder value” to result as if by magic from an IR campaign. Stern And Company’s manifest view is that the role of an Investor Relations firm is to craft and effectively disseminate a compelling message. Delivering on the reality behind that message is on the company’s side of the equation. In short, stocks rise based on fundamentals and expectations of future increased value. But it is equally true that they fall quickly when a company’s credibility is vulnerable.

In Las Vegas, a number of companies selling for less than a half a dollar per share maintain their reporting status with the Securities and Exchange Commission, yet only disseminate material disclosures in news release form when it suits them; otherwise they rely strictly on SEC regulations, filing only 8-Ks or 10-Qs, leaving it up to shareholders to plow through the SEC site for news on their investments.

Over the past two weeks we have seen a half dozen local companies file no fewer than 15 8-Ks relating to very material events – the exit of a Chief Financial Officer, declining quarterly results, potentially significant litigation and more – all without issuing news releases to accompany the public filings.

All of these companies are on the OTC Bulletin Board, and many are at very real risk of falling to the Pink Sheets in the next six to 12 months. Their willingness to bury the bad news makes one wonder what their senior executives, virtually all taking six figure salaries, are thinking. Certainly they must not have any intention of actively competing for capital in the public markets. If they were to try, they would quickly learn that a company which fails to be transparent is a company that is not credible in the marketplace.

The moral: Never bury bad news. Get it out. Fix what’s wrong if you can, or at least communicate a strategy to do so. Disclose and move on.

About Stern And Company

Stern And Company, based in Las Vegas, develops and implements strategic corporate communications, financial relations and marketing programs for public and private companies.

All of our professionals have extensive senior-level experience as financial journalists with major publications or as communications executives at leading major corporations. Our firm’s practice areas include corporate and financial relations, public relations, strategic and product marketing, crisis communications, transaction communications, restructurings, bankruptcies and litigation support.

Stern And Company
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