Facebook Finally Saves Face

 Facebook Finally Saves Face

The PR Verdict: “B” (Good Show) for Facebook and their stock.

Facebook’s return to its IPO price is gratifying to investors, as well as to the firms on Wall Street that  set a price of $38 per share. But the comeback was more than just a successful resolution of a key business problem (mobile revenues). It was a case study in PR perseverance.

On May 18, 2012, after a 30-minute delay, the stock opened on NASDAQ and reached a high of 48. That’s where it stalled, and by the close of the first day of trading, finished flat. One month later, FB had fallen to $28, and reached an all time low of $18 at the end of August.

The level of criticism directed at all parties – underwriters, NASDAQ, and the company management – was overwhelming. The Wall Street Journal labeled the deal “a fiasco,” while others invariably referred to the deal as “botched.” Even the New York Stock Exchange publicly called out its rival, suggesting that NASDAQ may have set a “harmful precedent.” Facebook CFO David Ebersman and Morgan Stanley’s tech bankers took the most heat. Assessing the underwriters’ brand reputation, one Wall Street expert wrote: “…Morgan Stanley will take a hit for it, deserved or not. That’s a big break for Goldman Sachs and JPMorgan Chase.”

And yet, months later, all that has changed. Media criticism eventually lost steam, and the serious investors who held on to the company’s stock were vindicated over time. (Moreover, the JPM and Goldman reputations did not enjoy a “big break.”)

THE PR VERDICT: “B” (Good Show) for Facebook and Morgan Stanley.

THE PR TAKEAWAY: Don’t react; just act. Sure, Facebook management might have made more of an effort to embrace Wall Street. Mark Zuckerberg didn’t need to wear a suit and tie during the roadshow, but the hoodie and declarations that the company was “in no rush” to go public may not have sent the right message. But this was all on brand and contributed to Facebook’s business-as-usual unflappability. Given disclosure restrictions, defending Facebook’s pricing and underwriting process after the fact required consistency and patience. Over time, that strategy – which may have been no strategy – paid off.

JP Morgan’s Whale of a Hangover

 JP Morgans Whale of a Hangover

THE PR VERDICT: “C” (Distinctly OK) for JP Morgan. (Pictured: JPM chief Jamie Dimon.)

Stiff drinks for the staff at JP Morgan? A martini or two might have helped ease the pain from Friday’s Congressional hearing in Washington, which examined the firm’s now infamous $6 billion loss known as the “London Whale.” The trade generated not only steep losses but a level of scrutiny from regulators and the media that has had JP Morgan’s management on the hoof for months.

Friday’s hearing was brutal for JPM’s top brass. The list of accusations by the Senate’s Permanent Sub Committee on Investigations was simple enough: a risky proprietary trading strategy, concealing losses, manipulating pricing models, and lying to investors and regulators. Anything else? Actually, yes; the fallout continues as Senate aides are now pondering referrals to regulators and the Justice Department. This was a bad day for JP Morgan, and a very good day for the Senate’s PR machine.

Despite a parade of embarrassing and contradictory testimony, the thrust of JP Morgan’s response remains unchanged: “Management always said what they believed to be true at the time, period. In hindsight we discovered some of the information they had was wrong.” Fair enough, but unlikely to break the momentum on a train wreck of an issue that continues to gain momentum.

THE PR VERDICT: “C” (Distinctly OK) for JP Morgan. A straightforward and expected defense, though it’s unlikely to make much of a difference.

THE PR TAKEAWAY: Life is not always fair. Despite its clout, JP Morgan was always going to be outgunned in a public hearing concerning its embarrassing  losses. The bad news for the firm is that there is little that can be said to disrupt the forward movement on this issue, apart from what they’ve already said. Admitting you got it wrong may not be enough in an environment that continues to be out of love with banks. It will take more critical and remedial changes in management and strategy before the heat is turned down. Until then, another round, please…

Barclays CEO Admits He Was Dazzled by Diamond

 Barclays CEO Admits He Was Dazzled by Diamond

The PR Verdict: “C” (Distinctly OK) for Martin Taylor, former CEO of Barclays.

What to make of the recent mea culpa from Martin Taylor, the former CEO of Barclays? The Financial Times published his opinion piece, provocatively entitled  “I Too Fell for the Diamond Myth,” in which he describes his time as CEO of Barclays during the late 1990s.  Back then, Bob Diamond was running Barclays Capital, the investment banking arm, and reported to Taylor. Judging from the article, we can safely assume they don’t exchange holiday cards.

Taylor gives an insider’s view of boardroom dysfunction and a deliberate effort by traders within Barclays Capital to work around trading limits. The traders exposed the firm to massive risks by window dressing and reclassifying bets to get them past agreed internal controls. This was the late ’90s, after all.

Russia subsequently defaulted, and the markets went into freefall. Describing Barclays’ experience as “worse than most,” Taylor says the “failure to respect the internal control system” precipitated the fire sale of key assets. Traders were dismissed, and Diamond maintained that he had known nothing. Diamond offered to resign, but Taylor, concluding that the business was still in its infancy, said his direct report should stay. Taylor concludes by saying, “I deserve blame for being among the first to succumb to the myth of Diamond’s indispensability.” Ouch!

The PR Verdict: “C” (Distinctly OK) for Martin Taylor. After more than a decade, he has come clean with some insight. Trouble is, we’re still missing some basic information.

The PR Takeaway: Personal reflection wins people over, but ignoring key questions undoes the gain. If Bob Diamond wasn’t asked to leave, was he at least given a zero bonus for the year? Was anything else done to send home the message that the CEO running the business had bottom line responsibility? Without a full explanation, it’s hard to get past the sneaking suspicion that Taylor’s mea culpa might have been more of an effort to rewrite history than a more profound and insightful contribution.

Is Taylor’s article an explanation, or an excuse? Give us your PR Verdict!