Many of us enjoy “Undercover Boss” and the series, “Lifestyles of the Rich and Famous,” ran 10 years (1984-1995). An eternity for TV. The wealthy and powerful hold our attention.
On the flip side, we’re also fascinated when they fall. For example, many enjoy seeing a billionaire’s net worth drop. Similarly, people love David and Goliath stories, when a small person or entity overtakes a huge obstacle.
Some of those elements are part of this month’s Crisis Averted examples. The incidents below also touch on reputation, the power of words and the value of good communication.
Power of Words
Just days ago, school dropout Gautam Adani was Asia’s richest person and one of the planet’s wealthiest people. The 60-year-old still is a billionaire and his name is ubiquitous in India. Yet in the past few days his companies and net worth have dropped like a lead zeppelin. His personal worth is off $50 billion, Adani Group is down twice that.
Indeed, it’s a zeppelin that’s prompted the losses. In reality it’s a small, NYC short-seller named for a zeppelin, Hindenburg Research.
Investors fear allegations in Hindenburg’s 104-page report about some of Adani's companies are correct. The Jan. 24 report alleges the Indian mogul and his businesses, Adani Enterprises, illegally manipulate markets. Moreover, it claims Adani companies are opaque about much of what they do.
Hindenburg doesn't mince words, saying Adani is pulling "the largest con in corporate history."
Of course, anyone can spew claims, yet Hindenburg isn’t just anyone. Exposing business fraud in companies it’s invested in is what Hindenburg does. In addition, when Hindenburg makes allegations, it simultaneously unloads assets in the company it’s targeting.
A Strong Reputation
Importantly, Hindenburg’s reputation is strong. “I researched [Hindenburg] and didn’t find anyone litigating successfully against its reports,” says crisis pro Eric Rose, a partner at EKA. “They’ve been right every time,” he adds.
For example, a few years back, Hindenburg alleged the CEO of Nikola, a developer of alternative energy trucks, was making false claims about its technological prowess. In other words, Nikola’s tech wasn’t as good as CEO Trevor Milton claimed it was.
Hindenburg was correct. As a result of Hindenburg’s report, Nikola’s finances and reputation were walloped. And Milton was convicted of 3 fraud counts. He’s awaiting sentencing.
Similarly, Mr. Adani and his companies are suffering financially and reputation-wise in the wake of Hindenburg’s report. Still, Adani Enterprises had enough market juice for a successful $2.5 billion follow-on public offering (FPO) Jan. 31, days after Hindenburg's report went public.
Or so we thought.
FPO Cancelled
As we went to press today (Feb. 1), Adani Enterprises nixed the FPO. “Given the unprecedented situation and the current market volatility the company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction,” Adani Enterpises said.
Just the day before (Jan. 31), the FPO's perceived success was, for some, indication Adani's crisis was averted.
Yet a closer look at the FPO shows the bulk of subscribers were large institutions, from India and Abu Dhabi. These organizations apparently were attempting to show support for Adani. Retail investors were just 12% of FPO subscribers.
It's reported that Adani is a close friend of India's prime minister Narendra Modi, which could explain the country's support in the FPO and that of other nations. For crisis consultant Nathan Miller, CEO, Miller ink, these displays of country support "occur at a very high level...well outside the public eye...it's a case of geopolitics meets finance."
The Responses
Adani didn't take Hindenburg's report lightly. Just days after Hindenburg branded Adani a fraud, Adani’s businesses responded. One tactic was an attempt at deflection. A statement argued Hindenburg was doing more than targeting Adani, it was attacking India.
Yet the largest response came from a 413-page mammoth report that Rose calls “gobbledygook.” It was a hastily assembled “data dump” of photocopied court documents that did little to combat allegations, he argues. “For years, PR textbooks will use it as an example of how not to respond,” Rose predicts.
Instead, he argues, Adani should have used bullet points, briefly listing allegations and responding with facts. “It should have been 4 pages.”
[Update, Feb. 2, 3pm ET: Adani posted a video statement late yesterday. It was his first mention of falling values in his companies. During the 4-minute video, he says investors are his main concern. Meanwhile, shares in Adani's companies continued falling today.]
Not a Crisis
Despite the FPO's cancellation and Hindenburg's report, “there’s no existential threat” to Adani's empire, Rose says. A true PR crisis is something that potentially could "end" a business, he argues. “There was never any chance of that.”
“What he has is a smoldering fire around his reputation that could last for years,” Rose adds. Adani “is still a billionaire…falling a few slots on Forbes’ billionaire list is a first-world problem.”
Adani’s real worry is what, if anything, New Delhi does as a result of Hindenburg’s claims. “In a sense, the Indian regulatory regime hangs in the balance,” Rose says.
Miller agrees Adani will need to do "a lot of [reputation] work...this is going to be a legacy challenge...the stink of this report remains.”
In addition, Miller puts the Adani-Hindenburg episode to one side. He believes Hindenburg's work is sound. Allegations in Hindenburg's report aren't obscure, he says, "they were well-known before the report came out." These include the companies' heavy debt load.
On the other hand, he notes "there's an army of people using [disinformation on] social media to manipulate markets." Eventually, he says, information warfare "is going to be a challenge for every single publicly traded company."
At the moment, the odds aren't with companies. "The people deploying these kinds of strategies are far ahead of the publicly traded companies." He adds, "it's never been easier for people to manipulate stocks in really destructive ways."
PagerDuty's Blunder
Sadly, there've been so many tech layoffs lately, it's hard to keep track.
Yet you likely know of Jennifer Tejada, CEO of tech firm PagerDuty and the inappropriate way she announced a lay off of 7% of its workers Jan. 24.
Everyone knows. Rose says a tool he used found more than 400 mentions of Tejada's 1,700-word layoff email, which addressed employees as "Dutonians," also included verbiage about promotions. Moreover, it used corporate-ese, labelling layoffs "refinements" and quoting Dr. Martin Luther King Jr. in an awkward way.
Again, as you might know, Tejada's 'style' was destroyed on social and elsewhere in the media.
What's Next?
However, you might not know Tejada apologized, three days later. It received less coverage. That said, have Tejada and PagerDuty moved on? Was their crisis averted? Was it a PR crisis at all?
Rose and Miller don’t label it a crisis. “It wasn’t catastrophic,” Rose believes, yet they agree it was severe.
The way she laid off people “was not a mistake…a slip of the tongue or a quote taken out of context…it was composed and calculated...there's no excuse for this kind of communication,” Rose says.
Similarly, Miller says Tejada's email was "weird" and "is a symptom of a broader communication problem." He adds, "some CEOs don't know how to address people with empathy...and they're so isolated nobody calls them out on it...[Tejada's] not alone in this."
As such, the PagerDuty case might not be a situation where "the chief bungled one." Instead, he says, the company may lack a communication function. Without it, Tejada "may not [communicate correctly] ever."
No Apology without Pressure?
Would Tejada have apologized without receiving a plethora of negative media coverage? No, Miller and Rose say.
However, that could be a high standard. “Many people lack the introspection to apologize because they think they were at fault, most do so under pressure,” says Dr. Kerry O'Grady, faculty director and associate professor of practice, PR and corporate communications, Georgetown University School of Continuing Education.
Yet apologize is what Tejada should do whenever the incident is mentioned, Rose believes. "People are very forgiving when you admit you were wrong and your apology is sincere," he adds.
In addition, Tejada must work on the why, he says. Understand “why she behaved as she did.”
Accordingly, Tejada "should do something privately to start to connect with the people she offended,” Rose advises. Essentially, go into a type of rehab. “Reach out to people so she has a better understanding of how insensitive her comments were.”
She doesn't have to promote the rehabbing, Rose says. “People will talk about it,” he says.
Though “time heals these sorts of wounds,” the incident will never really end, Rose argues. “The internet is unforgiving…it lives forever…the best Tejada can do is create better [news], that pushes down” stories about her bad email in search rankings.
Seth Arenstein is editor of PRNEWS and Crisis Insider. Follow him: @skarenstein