Capital Markets / Investor Relations in Two Minutes or Less
Hindenburg / $EQIX Short Report Considerations for Public Executives
Public company executives are well-served to consider two considerations from the Hindenburg / $EQIX short attack.
1. Who Should Be Speaking on an Earnings Call?
2. Why a Public Company Executive Should Never Sell Stock Until They Leave the Company
Investor Relations represents an exercise in managing downside risk for the company and C-Suite.
The IRO’s job is to ensure that the executive team does not find itself in a compromising situation or being asked inappropriate questions.
Great Investor Relations represents insurance that the executive team will benefit from a long, fruitful, and enjoyable tenure at the company.
The Hindenburg / $EQIX Short Attack
The short attack in this scenario revolves around accusations of possible accounting manipulation.
These accusations put the Chief Accounting Officer into the spotlight.
The short seller utilizes quotes from the CAO from an earnings call to support the short attack. One can argue the quote is likely taken out of context.
Secondly, the CAO sold $350K worth of $EQIX shares several weeks prior to the short attack.
Two seemingly innocuous and unrelated data points are now significant negative data points supporting the short attack.
Who Should Speak on an Earnings Call?
Less is more.
Investor Relations and the Company should be focused on managing downside risk.
The goal is to avoid a situation where an executive makes innocuous comments or an innocuous explanation today that is then used against, him, her, or the company months or years from now.
Keep the call to the CEO and CFO.
Why Public Company Executives Should Never Sell Until They Leave the Company
Buying and selling stock represents the most powerful signal a public company executive can send to the investor community.
For investors, buying shares outright means one thing, the stock is going up. An executive only buys if the stock is going up.
Selling shares can signal a myriad of things and is a less definitive signal.
A sizeable sale or poorly timed sale can send a significant negative signal that the stock is going down.
Managing downside risk means not selling shares at the top or not selling shares several weeks before a scandal erupts at your company.
Key Learnings for Executives
Public company executives are always free to act as they wish within the parameters of the law, SEC, and other government agency rules and regulations.
Public company executives need to be prepared for the consequences of innocuous and seemingly unrelated actions.
Do you have the right Investor Relations Officer or team in place to help you manage the possible downside risks and maintain the integrity of your reputation and that of the company?
