Techlash – when PR announcements mess up share price
Written by Paul Maher
A company’s share price changes on day-to-day, impacted by a wide variety of internal and external issues. Perform well, make new hires and hit targets then share prices may rise. Naturally PR teams, who are positive in nature, shout this from the rooftops.
However, if a company isn’t performing well, if key members leave or targets are missed, the share price can fall. Unsurprisingly many board members prefer to keep negative performance indicators ‘close to the chest’. But unfortunately for them publicly-quoted firms are obliged to notify shareholders about events which may influence share prices.
The press are more than happy to share a company’s good news with shareholders, as well as their readers. Unfortunately for boards, many are even more happy to share a company’s misfortune. Because let’s face it, certain media loves to see a tech giant fall off its pedestal, even if just for a little while. Recent tech examples of the media’s technology backlash, or Techlash, may serve as a lesson for those running public tech companies.
Not long after celebrating New Year 2019, three days after to be exact – Apple shares fell 10% after the company released a rare profit warning to shareholders. CEO Tim Cook published a letter, waiting until after the Wall Street markets had closed for the evening, with revised its guidance for the tech giant’s year-end, blaming flat iPhone sales in China.
These ‘altered guidelines’ were not minor revisions, Apple had originally predicted around $91 billion in revenue, but now estimated $84billion – a $7billion drop. Unsurprisingly, and even though Wall Street was closed, shareholders were quick to sell and the PR announcement resulted share prices falling to $142.19. The biggest plummet in a single-day for six years. Just like its ill-fated ‘smartphone’, the Newton, Apple’s share price was subject to the laws of gravity, or at least market forces.
Tesla, or more specifically its CEO, Elon Musk, is often in the headlines. From smoking marijuna on a live podcast – which caused share prices to fall 9% – to insulting a British diver who saved a Thai youth soccer team from a cave, there have been several incidents which have caused investors to scurry.
One PR announcement which the company probably didn’t expect to mess up share prices was the early January announcement it had more than tripled its production of electric cars in the last three months of 2018. However, shares fell 9% as the news didn’t quite hit a sweet spot its expectant shareholders had hoped for.
Although it delivered 29,870 more electric cars than the previous year, the production of the company’s Model 3 Sedan was below expectations. Analysts had predicted Tesla to deliver 64,000 Sedans, yet the numbers only came in at 63,150, a miss of just 1.3%. Unfortunately, shareholders weren’t blinded by the ‘look over here’ PR tactics or founders blowing smoke into their eyes.
2019 certainly started with a bang for Snapchat, although not necessarily the positive ‘bang’ of success its board had in mind. Shares dropped 11.8% following the announcement by CFO, Tim Stone, of his exit “to pursue other opportunities”after less than 12 months in role. The announcement came after a string of high-profile figures leaving, including other heads of departments.
Previously, Snapchat had informed shareholders it was due to lose around $75m – $100m in Q4. With these announcements happening in quick succession and Snapchat employees, with more internal information into the financial state of affairs than the average shareholder, moving the ‘other opportunities’, it’s not overly surprising investors would also look for greener pastures.
In recent months it’s been hard to go a day without seeing Facebook or its CEO Mark Zuckerberg in the news. With several senior executives leaving, a rumoured ‘cyberattack’ causing a day-long outage and a US government investigation, it’s quite shocking Facebook shares have been relatively unscathed. So, what does Facebook need to do to make investors lose faith? Lose money.
In July 2018 Facebook had its worst day in stock market history. The company’s share price plummeted 20% as shareholders discovered it had lost more than $100 billion in value, and analysts weren’t short on reasons why. From GDPR, security concerns and a lack of new members analysts said it was a long time coming. Facebook was once again hitting the headlines for all the wrong reasons – and this time investors weren’t sticking around.
Shareholder expectations are increasingly informed by media who may not be favourable to tech. Meanwhile public companies need to scramble to keep up, hoping sales targets are hit, IT systems are up to scratch and employees at all levels do not transgress. Sadly there is also Fake News. No one wants to face a plummet in share prices due to a hoax announcement, as we witnessed when shares in Vinci fell by 19% after a fake press release stated it had fired its CFO.
It is worth remembering PR is not ‘just for the good times”. In fact media announcements can mess up share prices. Tech firms need to be alive to the possibility of a crisis affecting their equity.
With so many public tech firms facing the full glare of public markets, it’s a brave CEO who goes for an Initial Public Offering. Although many are lining up, including Slack, Uber, Spotify and and Dropbox, it’s worth remembering the Techlash is now on in the media.