Why Do Management Teams Want to Fire an Analyst?
Negative research is impactful and typically leads to a personal reaction.
Why are reactions personal?
Reputation, career, and compensation risk is extremely high.
Nevertheless, not all negative research is created equal. Some bad or negative research is more impactful than others. Presented below is a list of top reasons management wants to fire an analyst in the order of likely importance to management.
Top Reasons to Fire an Analyst in Order of Importance
1. Short Attack – Calling you a fraud so time for war
2. Sell Rating – Could be legit or just meeting a quota
3. Bad Research – The buy-side likes the “opposite” guy when they can identify said pattern.
4. Bad Models – The buy-side just avoids bad models
5. Bad Corporate Access – Lack of investor meetings (conference / NDR), or ambush meetings
Corporate access is an overlooked area of control for companies, hence being listed last. In my view, bad corporate access is the only legitimate reason to fire an analyst. Even then you probably want to do your best not to fire the person! The best initial response will be to impose better boundaries on who you allow management to meet with in the investor community.
Here are the five rules to consider when you experience negative research and want change or to retaliate.
Rule 1: Avoid Taking Personally
Rule 2: Always Respond Constructively
Rule 3: Do Not Attack the Investment Thesis
Rule 4: The Analyst Must Mess Up
Rule 5: Do You Have an Enforcer?
Bottom line, taking negative research personally and throwing the first temper tantrum only sets management up for failure.
Once management loses credibility the slope of the climb back to credibility is like climbing the Himalayas!
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