You only get one chance to make a first impression, and two companies recently provided ample evidence of why, when communicating with the public, it’s important to make the right first impression.
Before I comment on what occurred, here’s a quick rundown of the facts:
Company: CenterPoint Properties Trust
Action: On Friday, April 15, real estate investment trust CenterPoint Properties disclosed in a Securities and Exchange Commission filing that, effective that day, “Paul T. Ahern, the Executive Vice President and Chief Operating Officer of CenterPoint Properties Trust, is on administrative leave for an indefinite period of time.” The company did not issue a press release relating to the news.
Reaction: On Monday, April 18, at 1:27 PM ET, Dow Jones Newswire and The Wall Street Journal Online ran a story with the headline, “Questions Arise After CenterPoint COO Put On Leave.” The story contained a quote from an analyst, who stated, “[The news] raises a number of concerns that CenterPoint was unable to address when we spoke with the company this morning. We can’t entirely rule out the possibility that a larger problem exists.”
Second Action: A little more than an hour after the Dow Jones story was published, CenterPoint issued a press release, stating, “That the basis of Paul Ahern’s administrative leave, announced last Friday, is solely related to Mr. Ahern, is unrelated to the operations of the business and does not affect the reporting of CenterPoint’s financial results. The Company believes his leave will neither impact the Company’s relationships with its current or future tenants or its venture partners, nor affect its competitive position in the Chicago industrial marketplace. Mr. Ahern’s leave is not expected to have any effect on CenterPoint’s 2005 earnings guidance.”
Company: Intermix Media
Action: On Tuesday, April 12, online media and marketing firm Intermix Media disclosed in a Securities and Exchange Commission filing that the New York State Attorney General has advised the company that it is considering commencing action against it for, “Unlawful and deceptive acts and practices associated with distribution of toolbar, redirect and contextual ad serving applications (downloads). The NY AG asserts that the Company and/or third parties distributed downloads that were installed by users without sufficient notice or consent and in a manner that made it difficult to locate and remove the programs. The NY AG, in the event of litigation, would be seeking disgorgement of profits, civil penalties and other remedies. While the Company respectfully disagrees with the assertions of the NY AG, the Company is committed to resolving the matter as soon as practicable. The Company’s download applications and business, part of its Network segment, were created by past leadership. The Company has been in the process of scaling down its download business, which does not represent a material component of the Company’s fiscal year 2006 forecasts contained in the Company’s current report on Form 8-K filed concurrently herewith. The Company’s estimate of the financial impact of the NY AG matter is included in the Company’s forecasts, although no assurance can be given that the financial impact of the matter will be confined to the Company’s expectations.” Intermix Media also issued a press release containing its financial guidance on this date, which, as mentioned in the company’s SEC filing, included an estimate of the financial impact of the NY AG matter. The company then hosted a conference call with analysts and investors to discuss its guidance and the NY AG matter.
Reaction: At 5:48 PM ET on April 12, Dow Jones Newswires and The Wall Street Journal Online published a story about the NY AG matter. The story included one sentence about the company’s financial guidance. The Associated Press and Reuters later ran stories regarding the company’s financial guidance. The AP story did not mention the NY AG news, while the Reuters story only included a cursory mention. Shares of Intermix Media fell more than 17% over the next two days.
Second Action: On Thursday, April 14, at 3:24 PM ET, Intermix Media, as its stock continued to fall, issued a press release headlined, “Intermix Media Corrects Inaccurate Coverage of Download Applications.” The company stated in the release, “Several allegations contained in recent articles were obtained from third-party databases and are inaccurate or outdated. Intermix’s toolbar and redirect applications are search applications that do not and never have tracked the activities of their users – they simply do not ‘spy’ on consumer Internet or other activity.”
In both of the above instances, the companies in question failed to deliver an accurate and unquestionable message out of the gates. By making the mistake of believing “the less detailed information the better,” the companies left themselves vulnerable to speculation and, in doing so, created their own problems. Ten years ago, the results would have been quite different, but times have changed.
For public companies, the implementation of Fair Disclosure regulations have forced companies to distribute information to the public on a more regular and timely basis. Investors, meanwhile, are more savvy than ever when it comes to interpreting information. Ten years ago, the average investor would never read a Securities and Exchange Commission filing, much less listen in on a conference call. Today, it’s standard for individual investors to – if nothing else – glance at SEC filings and keep a close watch on their investments by reading news services such as Reuters.
For all organizations – private or public companies, governments, schools, etc. – the public at-large is much better informed than it was a decade ago. The Internet has brought information literally to our fingertips, and at speeds once unimaginable. Through message boards, chatrooms and weblogs, the average consumer has a voice, one that can heap praise, or one that can sow discontent. Likewise, press releases, once only the reading domain of journalists, are now consumer content. So when I look at these two recent cases – CenterPoint and Intermix – I see two companies who are living in a false reality.
In CenterPoint’s case, the company tried an old White House trick of revealing negative news on a Friday afternoon. The thinking here is that journalists have wrapped up their stories for Saturday, when news-flow is slow to begin with, and that you and I have better things to do than worry about what the government or a company has to say. The problem here is that the bad news then festers over the weekend, bringing about rumors and innuendo because there is no one around to clarify anything.
The language in CenterPoint’s original statement is problematic. The statement, at first read, leads the reader to believe that something serious that could impact the company has occurred, and as a result, an executive has been placed on leave. CenterPoint’s press release, issued three days later, provides ample clarification, and allayed the one big fear – that the executive being put on leave translates to a fundamental problem at the company. The question we’re left with then is: Why didn’t CenterPoint just clarify the issue in the first place?
CenterPoint’s other major mistake is that instead of issuing a clear press release on the subject in the first place, it tried to “slip” bad news under the radar in the form of a SEC filing. Like press releases, SEC filings are now common reads outside of the world of journalism and Wall Street, and investors don’t shy away from reading these documents. The “slip-in” almost always backfires now because of this very reason, and each week dozen of companies end up issuing press releases to clarify statements made in SEC filings. Once again, we’re left wondering: Why didn’t they just issue a press release in the first place?
Moving onto Intermix, the company probably doesn’t feel that it made any mistakes, and on the surface, it didn’t. The company acknowledged the NY AG investigation in its financial guidance press release and even held a conference call on which it discussed the issue. Likewise, out of the three wire services that covered the company’s news, only one concentrated on the negative. Intermix, however, did make a mistake.
Like CenterPoint, however, Intermix simply did not do enough up-front to clarify its position on a matter. Instead, the company waited two days – while its stock fell – to clarify the issue. The company’s release clarifying the issue appears to have been a reaction to how the stock was trading, and the release does an excellent job of explaining the issue. Though the company says the release was the result of the inaccurate media coverage related to the news, I think it’s clear from the beginning that the company did not provide enough information about the subject, or explain properly why the issue is not material to its overall business. Had they done this, there would not have been inaccurate media coverage.
Let these two companies serve as examples of why it is imperative to get your message across the first time. Even if the news is negative, you are better off being long-windedly crystal-clear about the subject in a formal press release than you are by being determinedly vague in another format. By giving the public – and the media – more information up-front, both of the companies I’ve highlighted could have avoided inaccurate media coverage and rumors that swirl when news consumers are left with only part of the story.
(Disclaimer: The author owns shares of Intermix Media.)
This article, written by Ben Silverman, originally appeared in PR Fuel (http://www.ereleases.com/prfuel), a free weekly newsletter from eReleases (http://www.ereleases.com), the online leader in affordable press release distribution. To subscribe to PR Fuel, visit: http://www.ereleases.com/prfuel/subscribe/.