Unfortunately, stocks go down -- often faster than they go up. Stocks frequently decrease for reasons tied to performance, but stocks also decrease for reasons unknown or unrelated to a company’s business. Smaller public companies with lower liquidity are particularly susceptible to this volatility.
When a shareholder inquires about a stock being down, here are tips to help management ensure a calm, productive discussion with the investor:
- “Not based on news from the company”: Reiterate to investors that the decrease in the stock price is “not based on any news from the company”: Investors will appreciate assurance that there is no news or information that they are missing.
- Align with the investor: Reiterate that you too are a shareholder. This has a way of shifting the tone of the discussion when investors are reassured when their interest, and management’s, align.
- Focus the conversation on the business whenever possible: Bring the conversation around to what you have most control over — business performance and strategy. “Building value” in the business will contribute to a higher stock price.
- Don’t over promise: Human nature is to try to appease the other party and this can lead to over promising. Don’t. Keep your dialogue consistent with previous messaging, of course within the guardrails of Regulation FD, and communicate that the Company is focused on its stated strategies and initiatives. The stock will ultimately recover if management executes.
- Buy stock: Investors sell stocks for many reasons, but they buy stock for only one reason – because they believe that it will be higher in the future. Share purchases by members of management are an irrefutable indicator of confidence in the long term performance of the business.