A Terrible, Horrible, No Good, Very Bad Day

That’s what a short attack feels like.  I know.  I’ve been there. (To read about my terrible, horrible, no good, very bad day, see my case study here.)

By way of background, a short attack is when short seller(s) actively seek to profit by driving a stock price down.  Just about any company can become a target of a short attack, but those with complicated corporate structures, in regulated industries or with low liquidity or low float are most vulnerable.

Short attacks can be launched by well-known activists or anonymous bloggers operating out of their basement.  Such an attack can come swiftly in the mainstream business media and/or private investor forums like Value Investor Club.  One thing for sure is the market reacts before ascertaining the facts, so during a short attack a company is immediately forced into a defensive position regardless of the merits or accuracy of the short’s thesis.

What is particularly frustrating is the SEC historically has been skeptical of allegations against short sellers. When complaining about shorts, companies are often viewed as whiners and are rarely successful litigating claims against them.  Still there’s a glimmer of hope this may be changing. For the first time in recent memory, the SEC prosecuted a hedge fund last fall for its part in making demonstrably false and misleading statements during a short attack according to a Vinson & Elkins insight post.  This action will hopefully serve as a deterrent to the more egregious attacks.

Still, short attackers are not likely to go away anytime soon, so its best to be prepared.  Begin by assessing your company’s vulnerabilities.  A good resource to help you develop a short attack defense strategy is a primer put out by Ropes & Gray in late 2017.  In addition to this primer, here are some thoughts based on my experience:

  • Keep your ears to the ground. Be alert when seemingly tangential or even inconsequential questions begin to crop-up. Engage with investors, especially hedge funds, as they may catch wind of something before you do.
  • Assess your company’s risks and vulnerabilities and be familiar with common short seller tactics. This will help you be better prepared because once an attack begins, you may not have time to analyze the attacker’s playbook.
  • Aggressively monitor changes in short interest via your stock surveillance firm or retain a market structure analytics provider for timely updates. Know what’s normal for your company.
  • Don’t assume a short seller’s blog reaches a limited audience. If your stock is reacting and investors are calling, the game is afoot.  Focus on the best way to respond based on the merits of the short seller’s thesis and company vulnerabilities.  Regain control of the narrative and don’t engage in a public tit-for-tat.

My top recommendation is don’t get angry or distracted – focus your energies on defending and protecting the company.

Lisa Ciota
Lead-IR Advisors, Inc.

In a Clutch

In a clutch … that is being in a tense, difficult or stressful situation or crisis.  A clutch player is someone who can be counted on to perform (or outperform) in such situations.

Clutch players possess common leadership qualities[1] including:

  • Focus – It’s more than concentration, it’s knowing and staying fixed on the ultimate endgame
  • Discipline – Maintaining your center, avoiding distraction and being rooted in the fundamentals
  • Adaptability – Flexing and responding given the situation, pressure points and vulnerabilities
  • Being Present – Being in the moment and mindful of situational nuances, impacts and context
  • Constant Striving/Fear & Desire as Motivators – Complacency is the enemy of greatness and friend of the mediocre.

Why bring all this up?  Because these qualities are essential to confronting a corporate crisis … when clutch performances are required.  The good news is these qualities can be developed and programs focused on embodied, mindful or centered leadership can help.

But equally, if not more, important to navigating dynamic, chaotic crisis situations is to actually have a crisis plan, know it and practice it.  Crisis management plans need to be an integral part of a company’s enterprise risk management process and should be informed by and evolve with the company’s strategies and risk tolerances.

Now, what does a crisis management program look like?  Most experts indicate such a program should:

CompassIdentify Risks and Priorities:  Its essential to identify key operational and reputational risks, but nearly impossible to anticipate everything. So, establish guiding principles to guide the risk assessment process.  Such principles could be centered around priorities like protecting people (employees, customers and communities), preserving corporate reputation, minimizing operational disruption or preserving assets, etc.

PencilDevelop the Plan:  The crisis plan should include well-crafted decision matrices robust enough to handle an array of contingencies as well as contain escalation protocols, key communications templates and an outline of roles/responsibilities and work flow.

Team tableForm the Team:  The crisis team should encompass a variety of disciplines and expert resources (both internal and external) to guide and execute the response.  The people involved may be different depending on the type of crisis and decision matrices can help identify this.

ArrayPractice the Plan:  Practice enables crisis team members (internal and external) to build relationships and trust with each other.  Whether it’s a table-top simulation or a robust fire drill, practice will make you faster and nimbler when the need is real. It can also help identify areas where additional training, support or resources may be needed to reduce risk.

Danger signKnow How to Deploy: Work the plan. Gather information and stay focused on guiding principles.  Leverage the plan’s communication process and regularly share information as appropriate with key internal and external stakeholders.  After an event, let your guiding principles prioritize an integrated recovery plan.

Magnifying GlassReflection: After a crisis, conduct a post-mortem of root causes and what went well and what didn’t during the response. Reflect on underlying factors and take action to correct, mitigate, improve. Communicate key findings to stakeholders such as employees, customers, suppliers, communities or regulators as appropriate.

In a clutch, investor relations officers will be talking with investors nearly non-stop during a crisis.  So, think through the best ways to communicate with investors, who the key influencers are and who may need to be prioritized for outreach whether by you, your management team or board post-crisis.

Other Practical Tips for IROs:

  • Crisises aren’t always a surprise. Warning signs often abound. Develop a bullet-point outline for top of mind issues. Yes, there will be holes and you can’t anticipate everything, but it will be faster than starting from scratch.
  • Keep a key contact list with you – at home, the office, your briefcase. Even better, save a PDF copy to your phone, tablet and laptop – you’ll almost always have one of these with you.
  • Be prepared to handle a crisis remotely. Develop a process checklist or reference sheet (see sample) that contains emergency contact information and login IDs for key vendors such as your newswire service. Again, keep a copy with you and on your electronic devices.


Lisa Ciota
Lead-IR Advisors, Inc.

[1] Sullivan, P., Clutch: Why Some People Excel Under Pressure and Others Don’t.