Expect the Unexpected: How to Plan for a Crisis
31 March 2021
By Vanessa Hartung
2020 was truly an extraordinary year. From navigating a pandemic to an increasingly “aware” investor base, to security concerns and limited budgets, there was no shortage of challenges for IROs to manage. There were also countless lessons to be learned, many of which were discussed on a recent webinar “Expect the Unexpected: How to Plan for a Crisis.”
During this informative session, Q4’s Head of Global Partnerships & Alliances, Mike Coffey, moderated a panel of experts, including IR Partner at Q4, Matt Tractenberg, Head of Equity Surveillance and Capital Markets Intelligence at Q4, Billy Eckert, and Jason Rechel, Head of IR at Sprout Social, to recap some of the events that helped shape 2020.
The panel of experts discussed how IROs managed through these extraordinary times and shared some of the best practices for preparing for any future crisis. Participants dug into some of the industry’s most pressing issues, including the rise of the retail investor and the rules of engagement around social media and its impact on the markets.
The Impact of 2020’s “First Crisis”
With the stock market hitting new highs, 2019 ended looking fairly strong, only to grind to a halt in mid-March. The pandemic crisis not only drove the markets to sell-off across the boards, it deeply impacted the way IROs would operate for the foreseeable future. Billy shared that this volatility prompted a level of client engagement he’d never seen before.
“This wasn’t just the IRO leaning in,” Billy explained. “The C-suite and the board became much more involved and wanted to know, on a daily and minute-by-minute basis, how the stock price was doing, how it fared against their peers, and whether there was anything to worry about on the way down, like activist accumulation.”
Jason offered some great advice gleaned from how his senior leadership team responded to the early phases of the pandemic, despite being a newly public company. With no operating credibility to lean on, the Sprout Social team prioritized transparency in their investor communications, providing as much insight as possible to the investment community.
“We wanted to be as transparent as we possibly could as far as communicating what we were seeing, what we were likely to expect and what, exactly, from an operating and financial performance perspective, they could anticipate under various scenarios, which we may or may not have been able to control.” The transparent and frequent communications helped to ease investor concerns in what was a very chaotic time.
The Next Wave of Disruption: Rise of the Retail Investor
More recently, just as companies began to feel some relief from the volatility of the pandemic, a wave of retail investors disrupted the market and IROs. Interestingly, as Billy explained, the emergence of Reddit’s r/WallStreetBets and others was partially fueled by the conditions created by the pandemic. In addition to retail platforms removing barriers to entry by making trading more accessible and affordable, employees were working from home, afforded more time to trade online with, perhaps, a bit of stimulus money in their pockets – all factors contributing to the renaissance of the retail investor.
But perhaps the most significant catalyst was the rise of social media as a major information consumption conduit. Billy shared how social media created artificial demand and a “FOMO” mentality that began to fuel mob movements that wouldn’t be possible for individuals. Encouraged by a social media narrative around stealing from the rich and giving to the poor, creating an artificial demand, and fueling this bubble-like condition.
But panelists quickly pivoted to the other side of the social media coin, specifically its utility in monitoring investor sentiment and enabling IROs to uncover important insights. Jason urged attendees to recognize that there are more investors, beyond just the traditional institutional firms, and that these retail investors are organizing and engaging with stocks on social media every day. He amplified the importance of tapping into the social media conversation by sharing specific examples of how the senior team at Sprout utilizes the information captured through social listening. Monitoring and engaging in these conversations is becoming increasingly important to the IRO role and can help control the company’s narrative, inform daily activities, and deliver actionable insights to the senior team.
Preparing for the Unexpected
The panel discussed how to use the many lessons of 2020 to better prepare for the year ahead. Matt shared some best practices that will certainly continue in 2021, including being both pragmatic and transparent.
Our experts also touched on how IROs can stay ahead of short-sellers by monitoring traditional sources trading data as well as social media. Billy reminded attendees that surveillance is really the only way to get a holistic view of what’s happening in the market and reiterated the importance of monitoring for IROs and members of the C-suite to understand whether what they’re seeing warrants worry or not. He even confessed that, in addition to financial and traditional media, his team follows social media and chat boards to ensure they’re assessing all risks. And importantly, he suggested that this type of monitoring can help identify whether a run-up of your stock during these volatile times is tied to retail frenzy vs. an activist quietly buying behind the scenes under the cover of all this activity.
Matt left attendees with the recommendation to have a plan as well as a back-up plan to be prepared for the unexpected in 2021. The lack of clarity around how the year will shake out certainly makes budgeting a challenge, but IROs need to recognize the risks and develop a playbook for the various possibilities: “Planning for a crisis is necessary but we have to remain flexible and agile in this uncertain environment.”
No one could have predicted the pandemic, but being prepared for the unexpected will help companies navigate choppy waters ahead. Leveraging technology and social media will be essential going forward. Learn how to best utilize the different social media channels by reading How to Use Social Media to Amplify Your IR Efforts.