Fogel & Partners Quarterly – A changed communications landscape

The Russian author Fyodor Dostoyevsky once said: “Much unhappiness has come into the world because of bewilderment and things left unsaid”.

Many CEO’s of listed companies will certainly agree with this adage. In a world where “trust” is one of the keywords, and the prime concern and challenge of the companies is to attract capital and investors, there is an increasing feeling that the role and working methods of their traditional external intermediaries – mainly sell-side analysts and financial media – has gradually changed. In the wrong direction. Or rather directions, since the communications landscape has changed dramatically in the last decade or so, with new large unchartered territories and a rising number of different maps – all supposedly leading to Success and Trust. Had Hillary and Tenzing tried to use any of them on their way up to the top of Everest, 60 years ago, they would probably still be wandering around the Himalayas.

Pronounced transformations for sell-side analysts

Traditionally, the companies must cut through layers of information noise to get their messages across. And the smaller you are, the louder you have to shout. But what we hear now sounds more like dissonance. Not necessarily louder, but definitely more bewildering.

In recent years, during one of the most dramatic overhauls of the global banking system, whole trading floors have been emptied, and thousands of bank employees have been told to pack their things and leave the building. With its current wafer-thin margins and decreasing profitability, equity trading has been taken over by robots, algorithms and self-serve alternatives.

So in one great sweep with the broom, the very existence of the still remaining sell-side analysts – one of the most important intermediaries for the publicly traded companies – looks dire. Coverage becomes more and more selective, with a continued strong focus on the large cap dinosaurs. Since there is no money to make covering the small or even mid-sized companies, these are sadly left to fend for themselves. Sometimes whole sectors – remember Biotech, anyone? – have been put somewhere in storage, left among the dust and other once profitable has-beens and investor darlings. Also, to a larger degree, more and more investors, for various reasons, rely on their own in-house analysts, or other sources of information.

This is of course bad news for the companies that now have to find other means to get heard. Paid coverage – often included in a package that also features for instance conference participation and capital market days – is one alternative that is slowly but firmly being accepted.

A number of corporates are favouring a reduction of quarterly reports, claiming unnecessary, unwanted workloads every three months. And not a few of them are small players, whose normal news flow is trickling at best. The quarterly reports at least guarantee them a (quasi) continuous contact with existing and potential investors.

This reasoning leaves many stakeholders scratching their heads, and in the long run individual investors less inclined to put their money on an organisation that comes out of its hermit hole on just a few occasions every year. Again, this is a lost opportunity to get your messages through.

Much higher speed for media

Another intermediary is of course financial media. The media landscape has also gone through overwhelming changes in the last decades, but unlike the somewhat arid world of contemporary investment banking, here we see a Garden of Eden – but where the gardener is on paternity leave and no temp has been found yet. It just grows and grows, with more species fighting for air and a place in the sun. Traditional media has gradually metamorphosed and in parallel been supplemented by other fast-moving, constantly attentive channels. And the journalists all work 24/7. They are faster, they are harder to get out of the editorial office, and they are in constant need of new materials, new leads and new scoops.

You can argue that it has always been like that, but now the actual funnelling of corporate stories has become much more complicated, not the least due to online media’s more or less total lack of deadlines. It is like Las Vegas, where you can go into a restaurant at any time of the day and order breakfast, lunch or dinner, depending on your own personal clock. Articles and news flashes are pushed out in an endless stream, at a tremendous speed. Quarterly reports are scanned by machines that make it possible for newswires to send out one-liners in less than a tenth of a second. Then, maybe, a reporter takes over.

Social media has changed the rules

Another whole new dimension is the world of social media, built around blogs, Facebook, Twitter etc. Recently, Bloomberg announced that Twitter is making its debut on trading desks via Bloomberg terminals, thereby being officially approved as a disclosure channel. From now on, tweets are incorporated in Bloomberg’s data service, and will allow traders and other professionals to monitor social media buzz and important news about companies they follow, courtesy of chief executives and other newsmakers. According to Bloomberg, it is now not uncommon for news to surface on Twitter even before the newswires carry it. This is a clear sign how the American Securities and Exchange Commission (SEC) has relaxed its stance regarding social media. As late as in December last year, the regulator warned Netflix that it could take action against the company for a 43-word message that the company’s chief executive, Reed Hastings, posted in his personal Facebook feed. In the note, Mr. Hastings congratulated his team for exceeding one billion hours of video watched in a single month.

Personalised storytelling needed

How do companies – and its stakeholders – tread through this minefield? Some – like Mr Hastings – barge in; others just shut their eyes and go somewhere else. Whatever you might think, it is here to stay, be sure of that. So it is up to everyone to handle it with accuracy and professionalism. But it certainly adds to the dissonance.

All this seemingly bewildering array of intermediaries puts a lot of extra stress on the companies that need to communicate with their stakeholders in a correct, all-inclusive fashion, making sure that all messages are carefully chiselled out, disregarding what channels you use.

Some journalists and analysts claim that top management have become less visible and – what is worse – less willing to depart one line from the (more or less) well-prepared scripts and statements. Sanitised Corporate Speak rules. Truth is that they most likely are afraid to get publically spanked by the authorities for saying things that were not in the published press release.

The sad outcome of this trend is that when chief executives actually do meet reporters and analysts they merely repeat the official statements and duck when they see potentially dangerous follow-up questions thrown at them – even if some well-prepared answers could have actually added value to the corporate story. And could have made the difference to be able to successfully cut through the corporate buzz. Personalised storytelling is needed in order make this happen. Then make things happen. Tell. Show. Then you create trust. Which in turn could lead to more capital and satisfied investors, new as well as existing.

Instead we could be left with even more bewilderment and things left unsaid. A most unhappy development.