Every public company loves goods news. Sign a new contract? Win a new customer? Get positive results from a field trial? Put out a press release and chances are that the markets will respond favorably and drive up the share price.
Bad news, on the other hand, causes too many issuers to lose perspective. Some companies will want to schedule an announcement after market close on a Friday night. Worse, others will want to go into silent mode unless disclosure is absolutely required. The belief, of course, is that the company’s share price will suffer once negative news is released.
Even if the hit to their market capitalization is minimal or short term, some companies lose sight that how they handle bad news will have a considerable bearing on their credibility with investors over the long term – often causing irreparable damage. This is particularly true if certain details are buried within regulatory filings, or worse, not disclosed at all.
By being open and providing context on the reasons for losing a key customer, missing a product shipment date or other corporate setback, chances are that a company will have stronger support within the investment community over time.
Generally, clear, consistent and regular communication – whether in good times or bad – leads to less share price volatility and a higher valuation.
[...] This post was mentioned on Twitter by Pierre Bellerose. Pierre Bellerose said: RT @CNWGroup: Why communicating bad news can lead to long-term support, from @equicom’s new blog, IR Matters: http://bit.ly/tf6ub [...]