Capital Markets / Investor Relations in Two Minutes or Less
What the $PLCE Saga Teaches Public Company Management Teams
A major rule of being a public company executive revolves around not breaking investor mandates.
Typically breaking a mandate leads to a management team churning their entire shareholder base.
In early February 2024, New York Community Bankcorp faced this phenomenon and now Children’s Place experienced such investor churn over the past 10 days.
A quick summary, the company pre-announced disastrous 4Q23 results and announced it was open to strategic alternatives on February 9th.
By February 16th, the stock started at $20, dropped to $8.50, then hit a high of $38, settling at $29 and change.
A roller coaster for Investors and Management where no one really wants to be a participant.
Key Take-Aways for Public Company Management Teams:
One Quarter Off Can Be Catastrophic: Public company management teams need to execute on the underlying business every quarter, or get ahead of the catastrophe on the horizon.
Remember, public company management teams are one bad decision or one deal rejection away from humility. A management team can ill afford to play the wait till the end of the quarter game for the business to turnaround.
Doing so will only result in angry investors and a pink slip.
Liquidity Always Matters: Management teams need to be on top of liquidity issues and planning a resolution well in advance of the possible catastrophe. These events will always churn the investor base, and therefore, require significant preparation.
Always Know Your Shareholder Base: Knowing your investors can help you identify multiple sources of strategic liquidity when you find yourself in need. Having a list of possible ready buyers helps with strategic alternatives and any capital raising efforts you might undertake.
Strategic Alternatives: The timing in this situation is really interesting. Company announces openness to strategic alternatives and names an investment bank to run the process. One business day later, an investor is a 20% holder. Four business days later, the same investor owns 55%!
The Bottom Line:
Don’t be the management team that guides to 2.5%+ operating margins and then reports (8.5)% operating margins!
A result this catastrophic needs to be pre-announced as soon as accounting finishes the initial close of the books.
Management teams can ill afford to report catastrophic outcomes a month after accounting close, when the signs and signals were there throughout the operating quarter!!!
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