Corporate Eye

Merrill Lynch & Lehman Brothers – IR Reactions?

Yikes!  Monday morning, and in America, people are waking up to find the financial world turned upside down.  Despite the fact that most Americans own stock in one form or another (often in their 401(k) retirement plans), the vast majority don’t know most major Wall Street firms any better than they know any of the major companies that don’t put items on the shelf at the grocery store or department store.  But, almost everyone knows Merrill Lynch.

When Bear Stearns faltered earlier this year, the shock waves among those who know something about the world of finance and investing were monumental.  Most of the people on Main Street, as they say, were not necessarily as aware of just how big a deal it was.  This morning though, it isn’t just the financial section and the business talk shows discussing the smoke on the horizon, the talk is everywhere, from Main Street all the way to County Road 14, people are nervous.

Investor Relations to the Rescue?

In times like these, there is little anyone can do to help the common investor other than provide a little bit of hand holding.  Of course, most forms of that are specifically prohibited lest they be interpreted as being misleading or offering some sort of guarantee.  So, all the IR staff can do is keep people informed.

At Merrill Lynch’s website this morning, a press release about the Bank of America takeover sits on the front page.  Also, information tops the IR page as well.  While some might complain it is sparse, one can’t expect much in this time frame.  Still, the Merrill website nicely illustrates the value of communicating with your shareholders.  Although these shareholders will soon be BoA shareholders instead.

How about Lehman Brothers?  A similar strategy has unfolded there as well.  A front page link to the news is displayed.  In the IR section?  The announcement of a conference call, and perhaps most helpfully, a link that an investor can use to listen in to the call.  When nothing major can be done to help, it is the little things that help establish and maintain a useful channel of communications.  Again, the shareholders here may not be much longer for this world, but it is encouraging to see that the companies still are taking their obligations to their shareholder owners seriously.

Should IR react at another company?

As the third quarter draws to a close, I cannot count the number of brochures, letters from chairmen, flyers, and statement enclosures that I have received as an investor.  Each one extolling the virtues of patients, reminding me that in times like these it is important to remember long term goals, and basically just telling me to calm down.  Of course, these all come from mutual fund companies.  As a publicly traded company, what can IR do to provide similar help?

The reality is that specific information of the type mentioned above would not be prudent or legal for most publicly traded companies.  While a mutual fund can suggest that long-term performance will take care of any intermediate hiccups, an individual company cannot give the same assurances.  The mutual funds that invest in US financial companies will undoubtedly be hurt by recent events, but assuming proper diversification and prudent management, they will likely survive and eventually profit.  The same cannot be said of Lehman Brothers stock.

Getting a straight reaction from another Wall Street titan is difficult because most have been consolidated into other banking enterprises.  However, Goldman Sachs’ IR page shows no reaction this morning which is not surprising.  Will they react as the day and week goes on?  Time will tell.

Best Practices

For your company, there may be no direct relation to the events in New York.  However, the widespread nature of this news-cycle may begin to make your investors nervous and they will come looking for information.  What can you give them?

Chances are, your company has had an executive or other management team member address an audience with a speech aimed at providing some comfort during tough economic times.  Such a speech has already been vetted for compliance.  Now might be a good time to get something like that posted on the IR site.  Of course, posting just that one is a recipe for trouble, so use this as an opportunity to get a whole paradigm going with presentations by company representatives posted on a regular ongoing basis.  It helps with the problem of now, and improves your IR site for the future as well.

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Brian is a small business owner, consultant and freelance writer. Brian began his professional career in the computer industry as a consultant where he became keenly aware of the internal workings of companies from Fortune 100 giants to small two-man shops. While working with a mutual fund company, Brian developed a strong interest in finance and became a Certified Financial Planner. As a financial professional, Brian specialized in working with small business owners. Brian is the co-founder of ArcticLlama, LLC a premier business writing and consulting firm. He also runs a real world personal finance blog. Brian lives in Denver with his wife and daughter.