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Jun 10, 2020

What happens to investor relations in a downturn?

Tim Human looks at lessons to be drawn from the last downturn – and how things will be different this time

In 2008, Laura Graves, then Cisco’s director of global IR, stood up to kick off her company’s analyst day in Silicon Valley. She had spent many months helping to craft the agenda and prepping senior management, but she knew the audience’s thoughts were elsewhere. The previous day, Lehman Brothers, the 164-year old investment bank, had gone bankrupt. ‘We had to walk on stage knowing that Lehman Brothers, Bear Stearns, all of that was crumbling,’ Graves says.

Those events took place during the last major downturn. The subprime mortgage crisis pushed the US into recession in December 2007. Most of the developed world followed suit. Unemployment spiked across western countries, while the MSCI World Index fell by 50 percent. IR teams worked hard to stay close to investors and explain the impact of the credit crunch. They played a crucial role in guiding companies through the uncertainty and out the other side.

Eleven years on, we are facing another recession. Government action to curb the coronavirus outbreak has caused entire industries to shut down. The International Monetary Fund says the economic damage could be worse than in 2008. Once again, IR teams have their work cut out. So what lessons can we draw from previous downturns? And how will the situation be different this time around?

Elephant in the room

Today, Graves works as corporate vice president of investor relations at AMD. Recalling the 2008 analyst day, she says the first thing Cisco did was address the short-term picture.

‘You’re there to communicate longterm messaging. But you have to remember the audience, what’s on its mind at the moment,’ she says. ‘People wanted to know what was happening near term. And they were worried about their jobs that day.

‘We acknowledged right at the beginning what had happened. We showed empathy for how everyone was feeling. We made a comment about what we thought [it meant] for our business at that moment, because the financial sector was a large customer base for Cisco. Then, once you have dealt with the elephant in the room, you can pick everybody up and take them on the next part of the journey.’

By coincidence, Graves experienced a similar situation with an AMD analyst day this year. The semiconductor company held its event on March 5, around the time coronavirus fears began to shut down financial events in the US. ‘We were at the point where some people were still shaking hands and others were already bumping elbows,’ she explains. ‘We had a 20 percent drop-off in our in-person attendance. But our web attendance soared through the roof.’

Following the event, Graves waited a little for the market to calm down and then sent out an email to her distribution list with a link to the webcast. ‘I went into our webcast and pulled individual pieces of interest for people with the exact time markers, noting what might be helpful,’ she recalls. ‘I’m trying to proactively share information they can use as opposed to doing nothing. Doing nothing doesn’t help anybody.’

During downturns, IR teams must approach their messaging with great care, says Graves. The situation is fluid and evolving, so admitting that you don’t have all the answers is okay. ‘It’s a period of heightened uncertainty, so you focus on what you do know,’ she explains. ‘And remember that you know more about your business than the market does at any given time, but especially at that moment.’

By sticking to the facts and being transparent, companies have a chance to bolster their reputation with the investment community, Graves adds. ‘Get out there and deliver facts and continue to educate investors,’ she says. ‘Demonstrate that you’re calm, purposeful and in control of your company’s narrative with Wall Street. ‘And even if there is a pullback in your stock or the market as a whole, you’ll still come out the other side with a much more educated investor base.’

This is an extract from an article that appeared in the Summer 2020 issue of IR Magazine. To continue reading, click here to open the full digital edition of IR Magazine