How prepared are you when short sellers train their guns at you. FILE PHOTO | SHUTTERSTOCK
As recently as January 24, the Adani Group had a valuation of $220 billion from its seven publicly listed companies.
Its founder, Gautam Adani, was touted as the richest person in India and the third richest person globally with a forecast to overtake Elon Musk who had had a rough end to the year 2022.
In just three weeks, Adani Group has witnessed more than a 50 percent valuation wipeout, thanks to a detailed publication by short-seller Hindenburg Research.
If you have been following this story, you must have already caught up with the viral video of Mr Adani’s attempts at stopping the haemorrhage.
At the time of its recording, the group had only lost about $60 billion. The video did not work as intended as the bleeding continued.
Upon closer look, you will now notice that Indian media has intensified its positive coverage of the group with one reporting that the stock gained about $6 billion in a couple of weeks.
Sometimes it does not take a 413-page short seller’s research to shake the core of your business, a tweet with less than 280 characters has the potential of starting a fire whose effects can come close.
This worry is very real. The big question, therefore, is: How prepared are you, as an issuer, to handle short sellers’ pressures or general reputational risks?
Often in crises, clients do not stop to evaluate the different dimensions of the situation at hand and how the immediate actions will land.
If as a bank, your customers publicly raise complaints that question the integrity of your systems, a kneejerk cease and desist letter might seem like a good idea until it lands. I will not belabour the effectiveness of this approach.
Or perhaps as a telco, market pundits begin to publicly speculate key C-suite changes at your firm on account of recent political changes.
Perhaps the immediate low-hanging fruit is to make the CEO available for every — and I mean every single media opportunity there is on the land — key message notwithstanding.
As an issuer, just how prepared are you, when short sellers aim their guns at your reputation?
I understand the need to deny and dismiss allegations than look into them to see if there is some truth to them.
While this approach might work in some instances, it is a very tight rope especially when you have to walk it back.
Take your time to understand the allegations. Respond to queries that are raised with clarification or solutions.
Never with a threat or dismissal. If the allegations are false and baseless, by all means, seek legal redress and ensure your arguments are underscored publicly, consistently, and widely.
It pays to incorporate your communication team with the legal team to make sure your affidavits articulate what you want the media to highlight.
If there is any truth to the allegations, you may want to look inwardly as a company to review your mission and how you bring it to life.
However grim the situation might be, stand in the light. Do not use lies to cover up substantive claims. Do not attack the messenger. Focus on the issues raised.
The ideal thing to do is to analyse the allegation and evaluate your situation, mapping out all action scenarios and the possible reactions and planning for those as well.
When mapping out your possible action, draw up a list of surrogates who can vouch for you publicly because they understand the company’s long-term prospects, and are likely to be receptive if asked to provide additional funds in any form of capital raising or will buy additional shares if they feel the prevailing share price undervalues the company.
If this is managed well, the outcome of your crisis can be a build-up of a loyal shareholder base who are supportive of company management and their strategy.
Mercy Randa is the managing director at P&L Consulting.
No comments :
Post a Comment