Is PR now an integral part of stock market life?

In days gone by public relations (PR) would often be a simple nod and a wink to let influential investors know what was happening. The situation today is very different with literally millions of pounds spent on PR to keep private investors and institutional investors up-to-date with events. While we asked the question “is PR now an integral part of stock market life” the simple answer is yes!

The tail wagging the dog

Looking at the likes of Tesla, Weight Watchers, Facebook, Snapchat and Apple to a certain extent, far too much time seems to be spent on PR. These are companies which have experienced significant volatility in their share prices with the likes of Tesla, Weight Watchers and Snapchat under serious pressure. Investors are looking for short-term returns, which is switching the focus of directors towards “keeping investors happy”. Surely their time should be spent on long-term planning and returns?

Wasted working hours

We can only imagine the thousands of hours “wasted” pandering to the demands of institutional investors and, to a lesser extent, private investors. If we take Tesla for example, it has been a constant battle between Tesla’s leading light Elon Musk, analysts and short term investors. The share price has nearly halved since the much rumoured Elon Musk takeover (for which he was hauled over the coals by the SEC). While found guilty of misleading the markets, there is no doubt that he would rather take Tesla private and indeed he has said so publicly of late. However, funding issues have seen the Tesla share price under serious pressure.

Tesla will now be attempting to shore up support from institutional investors for the forthcoming fundraising when it should be focusing upon the actual business itself. Let’s not forget that it was institutional investors and analysts who “demanded” that Tesla cut costs. The company finally gave in and now the share price has been smashed.

Some companies are not stock-market material

It is fair to say that some companies in the early stages of development are not necessarily suited to the short term rigours of the stock market. Many extremely successful entrepreneurs very often find themselves at odds with others not as forwardthinking and entrepreneurial as themselves. How ironic would it be if Tesla was to eventually go private at a “rock bottom price” with investors and analysts having talked down the price?

Conclusion

It is the age-old conundrum, company directors have an obligation to focus on the long-term while many investors are simply focused on the short term. The constant demands of many analysts have in the past caused bad blood between companies and those advising private and institutional investors. Some analysts have significant influence over the way in which investors perceive the short, medium and longer term prospects of companies.

Is it fair that companies have to curry favour with analysts to get the best breaks? If company directors find that PR is taking up more and more of their time, with the company unable to “speak for itself”, then maybe the private sector would be a more appropriate home.

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