Prompting confidence with investors

The market's performance calls to mind a slow-motion train wreck, but a more apt analogy might be an avalanche, with vast resources sliding southward, burying everything its path.

In July 2008, the Dow closed at 11,215. In October, it checked in at 9,325. The week prior to Thanksgiving, in a cruel irony, it slid to 7,997.28 – the first dip below the 8,000 mark since 2003. The financial crisis that began in August 2008 has stripped an alarming percentage of valuation from former blue-chippers. Shares of Concur, Corning, Berkshire Hathaway, Dell, and Apple have all tumbled, in some cases between 50% and 60%. The market's performance calls to mind a slow-motion train wreck, but a more apt analogy might be an avalanche, with vast resources sliding southward, burying everything its path.

Unemployment rates are on the rise; some analysts project that unemployment might reach double digits in the coming year. Housing prices remain depressed. This means, of course, that worthy, well-run, cash-rich companies are being undervalued, their stock price weighed down by the lead balloon of investor gloom. Companies like yours, perhaps. There are several steps that you should take to instigate confidence among your pool of potential investors – steps to prompt them to give you a closer look.

Don't wait. The three months between earnings announcements represent territory that should be filled creatively. You need to tell a story and keep telling it. Use the open quarter to fill in details that make your story more robust and intriguing. Your story will be told, whether you tell it or not, and investors will draw conclusions – in the form of misguided guidance ranges – from your silence.

Produce pre-release, state-of-the-business announcements. Are you cash-flow positive? If so, make that the headline of your announcement. Few facts are more attractive to investors in an environment such as this. Develop announcements that showcase additional features that make you an attractive investment.

Communicate internally as well as externally. Your employees will react poorly to a dip in your stock price, for obvious reasons. Be open with your employees. Allow them to understand the forces that are driving corporate decisions. Sustained internal communications will remind employees they are active participants rather than passive witnesses.

Host Analyst Days. Analyst Days represent a longer-range tactic simply because they are logistically more difficult to conduct. They should form a core component of your 2009 plans, however, because they give analysts the ability to peer behind your CEO/CFO curtain to appreciate your executive branch strength and the disciplines driving your growth.

Analysts will press you to provide as tight a range as possible, but the relative informality of these settings gives you the flexibility to keep it open, to provide assumptions and updates rather than formal targets. In addition to Analyst Days, pack your calendar with industry conferences and public speaking slots.

Be straightforward. It isn't easy to admit you are not perfect, but what was true in kindergarten is true today: Honesty is the best policy. Before the 2008 recession hit, certain companies opted for openness; they took their guard down before the market prompted them to do so. They were hammered for it at the time, but the decision has proved wise. They are in far better shape today than companies that continued whistling past the economic graveyard.

Claire Koeneman is co-president of the Financial Relations Board.

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