SAC Capital and the Art of Halting an Investor Stampede

 SAC Capital and the Art of Halting an Investor Stampede

The PR Verdict: “A” (PR Perfect) for SAC Capital. (Pictured: Steven Cohen)

The clock is ticking for SAC Capital Advisors, the hedge fund run by Steven Cohen, now linked to an insider trading case that the government is touting as one the largest of its kind. As regulators are said to be “closing in” on the fund, SAC clients, whose money is managed by the firm, now have 90 days to decide if they’ve had enough and want their money back. Should they redeem, or keep their money there?

SAC, which manages over $14 billion, recently confirmed to investors that the firm might face civil charges over the alleged insider trading scheme that has already led to the arrest of a former employee. Normally, news like this would have investors rushing for the exits, provoking a disastrous run on the fund. But if the firm intends to emerge from its latest legal worries with an ongoing business, reassuring investors while being transparent about its legal woes is the immediate PR challenge.

Not all investors are happy; some have indicated they want to redeem. One French bank has reportedly cashed in its chips already. But other large investors are on the record as saying they will reserve judgment and keep their money with SAC, reiterating their faith in the firm and its management. To SAC investors wavering about what to do, public confirmation from co-investors that their money is staying put is just the sort of signal they’re looking for. At the moment, some clever PR is calming a situation that could otherwise become very risky.

The PR Verdict: “A” (PR Perfect) for SAC Capital. Endorsement from others is always better than tooting your own horn.

The PR Takeaway: If you want the message about you to be heard, let your friends say it. SAC ‘s recent coverage contains a surprising number of reputable and well-known investors confirming that they are sticking with the firm – at least, for the moment. For SAC management seeking to reassure investors, it’s the best sort of message, and one that it couldn’t deliver itself.

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Google and Larry’s Laryngitis

 Google and Larrys Laryngitis

The PR Verdict: The PR Verdict: “D” (It’s a Dud) for Google. (Pictured: Google CEO Larry Page.)

Larry Page, Google’s CEO, regrets he is unable to lunch today. And not just today, it seems, but all the way into mid July. The reason? Larry has “lost his voice” and “can’t do any public speaking engagements for the time being,” says Google. That includes the second quarter earnings conference in three weeks’ time. His voice is gone, and it isn’t coming back anytime soon.

The announcement has spooked investors. In an industry that endlessly speculated about the on again, off again health of Steve Jobs at Apple, this sort of news gets the rumor mill activated. Google says it is business as usual and that Page is “OK”  and continuing to run the company. “He’s running all the strategy business decisions and all that,” reassures Google.

Not all investors buy it. JP Morgan described the announcement as ”odd,” and others are wondering. One told the Wall Street Journal that the decision to miss an earning call was “highly unusual.” He said, “It’s hard to imagine a CEO missing that much stuff and not having a serious problem,” echoing what could become a rumbling chorus.

The PR Verdict: “D” (It’s a Dud) for Google. Who knows what the real situation is, but this explanation doesn’t reassure the market. Already suspicion is growing that Google is being less than frank.

PR Takeaway: Don’t over-complicate. Let’s face it, losing your voice doesn’t last three weeks. If Page can’t speak at earnings in three weeks’ time, it’s not a bad idea to flag it beforehand–but why not suggest that he’s having a minor medical procedure/treatment that will put him out of action for a fixed period? Use calming words to minimize the fuss and reinforce that it’s not market moving and material. Something is up, and now Google has more explaining to do. It might have been easier to have been straightforward from the start.

Should Google have anticipated investor worries, or is this a case of the truth just not being good enough these days? Give us your PR Verdict, below.

 

Irving Picard’s Pricey Pickle Post Madoff

Irvingpicard1 300x159 Irving Picards Pricey Pickle Post Madoff

The PR Verdict: “C” for Irving Picard.

Irving Picard is in a pickle.  The trustee seeking to recover funds for victims of Bernard Madoff is caught in his own headlines.  How much has been repaid to bilked investors so far?  Around $330 million.  And how much has been charged in legal fees by the trustee (ie Picard) to return that sum? Why  since you asked, around $544 million.  What a pricey pickle!

Eyebrows are being raised that Picard has been more successful at collecting fees for himself and chummy colleagues than returning money to investors.  The NY Times yesterday claimed that though settlement deals totaling $9 billion have been reached, only $330 million has been paid out.  The vast bulk remains tied up in endless court challenges.

Picard declined to be interviewed. His spokeswoman pointed out that so far he has recovered over $7 million a day for cheated investors.  Nice one but let’s face it, rather theoretical until the monies are paid out.  In any case, went the response, the legal fees are drawn from a fund provided by the securities industry to pay for precisely this sort of thing.  Bottom line? The money doesn’t come from recovered Madoff funds.  The securities industry is paying trustee Picard’s fees.

The PR Verdict: “C” for Irving Picard.  Is there a cheaper way to do this? With over $500 million in fees no explanation sounds particularly convincing but adding mitigating factors and some context helped.

PR Takeaway:  When things look bad, add context.  Yes the fees are large but they are paid out of  a fund provided by the securities industry to cover precisely this sort of issue.  Claiming $7 million a day has been recouped for Madoff investors is a nice headline – even if most of it is still held up in the courts and unpaid. Next time why not talk about the other side? Mention was made by Picard’s PR of the relentless attacks by “opposing law firms and their clients with deep pockets.”   A few more metrics to describe the squadrons of lawyers assigned to oppose settlements might have bolstered the only credible defense; firepower is needed to beat firepower.

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Did Warren Buffett Have To Say Anything?

warren buffett2 300x203 Did Warren Buffett Have To Say Anything?

The PR Verdict: “A” for Buffett's consistently smart PR.

So, Warren Buffett has stage one prostate cancer.  The famous investor isn’t worried and nor are his doctors.  Investors are sanguine and the media says unanimously it isn’t life threatening.  In a statement issued by his firm Berkshire Hathaway, Buffett, Chairman and CEO, said the news “is not remotely life-threatening or even debilitating in any meaningful way…I feel great.”

What then were the obligations to disclose the news?  Particularly given Buffett is already 81 years old.   Might it have been easier to sit tight and not mention it?

Buffett’s genial PR profile has long been associated with transparency.  He routinely tells investors when he gets things wrong and has often been his own harshest critic.  Making the announcement makes no difference to the day-to-day running of the firm.  But it does put him firmly in control of his own PR and keeps his reputation consistent with his public persona.  Smart move.

The PR Verdict: “A” for Warren Buffett’s consistently smart PR.  By making the announcement himself he was always in control of the message.

PR Takeaway:  Always better to make the announcement yourself than have someone else make it a scoop, and do it for you.  Buffett was in tight control of the agenda and was presumably pointing journalists to medics who were giving informed and on-message analysis of his prognosis.  With talk of who will be Buffett’s successor still ongoing, this could have been a gateway into a far more destabilizing media controversy for Berkshire.  No wonder he chose to go public.

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