Perhaps silence is golden, but when a critic slams your CEO and company as perpetrators of “the largest con in corporate history,” a response is needed.
Hindenburg’s Newest Target
What happened? As noted recently, Elon Musk lost a record $182bln. Fellow billionaire Gautam Adani, Asia’s richest man, didn’t do as badly this week. Yet the market cap of 7 companies he owns fell $10bln in one day (Jan. 25). And Adani's losses reached $51 billion late today (Jan. 26).
That came a day after Hindenburg Research's report blasted Adani Jan. 25. It called one of wealthiest people in the world a fraud and market manipulator. Hindenburg did excellent PR, tweeting ad nauseam excerpts from its report Tuesday (Jan. 24).
The Adani Group has previously been the focus of 4 major government fraud investigations which have alleged money laundering, theft of taxpayer funds and corruption, totaling an estimated U.S. $17 billion. (8/x) pic.twitter.com/4zxukHr4Mt
— Hindenburg Research (@HindenburgRes) January 25, 2023
As such, US-based Hindenburg said it was shorting Adani Group, or selling its Adani bonds and other instruments, anticipating they’ll soon fall in value.
This is not Hindenburg’s first rodeo. It’s a well-known short-seller and muckraker.
You might recall that in 2020 Hindenburg attacked Nikola, a developer of hydrogen-powered and electric trucks. Similar to allegations against Adani, Hindenburg claimed Nikola CEO Trevor Milton was a fraud. Specifically, it alleged Milton was lying about Nikola’s technological capabilities.
The mistruths included a video showing a Nikola truck moving along a road. Eventually, Nikola admitted the truck was rolling down a hill, not moving via its engine.
Not long after the Hindenburg report, Nikola lost General Motors’s financial backing. Later, Milton was charged with lying about "nearly all aspects of the business," indictments said. He was convicted Oct. 14, 2022, on 3 fraud counts. Ironically, sentencing originally was set for tomorrow (Jan. 27). Nikola remains a going concern as Milton, not the company, was charged.
Moreover, communicators should prepare responses for critics’ charges and activist investors' allegations. Most important, says Eric Rose, a partner at EKA, responses about investors' charges should go heavy on facts.
When challenged, Nikola whacked Hindenburg with press statements, yet provided few facts. Holmes’s Theranos took a similar approach. Admitting bad facts during a PR crisis is easier said than done, though it's considered the best route.
Though it’s still early, so far Adani Group is mimicking Nikola and Theranos. In statements it slammed Hindenburg’s charges as ““a malicious combination of selective misinformation and stale, baseless, and discredited allegations.”” Strong words, but no specifics.
In addition, Adani says it’s considering legal action.
[Update, Jan. 29, 2pm ET: Adani Group responds with a 400-page report.]
Hindenburg is adamant that its 106-page report, loaded with footnotes, is sound. In a tweet today (Jan. 26), it welcomed a challenge in court from Adani. "We have a long list of documents we would demand in a legal discovery process," Hindenburg tweeted (see below).
Our response to Adani: pic.twitter.com/6NcFKR8gEL
— Hindenburg Research (@HindenburgRes) January 26, 2023
Sometimes, companies should forego responses when activist investors make allegations, Rose says. Yet, with Adani’s huge financial stakes and Hindenburg's damning allegations, a response is required. As such, “Adani must employ a coordinated, comprehensive legal, investor relations and financial approach to counter Hindenburg,” Rose says.
Rose sees even more irony. Last month, he notes, India Today quoted Adani saying, “I always tell my team—never waste a crisis.” OK.
Emperor's New Clothes
What happened? Quite a week. Not since Geico's Gekko realized he wasn't wearing clothes was more time spent on brand mascots' sartorial choices.
You likely know of the pause parent company Mars unshelled Jan. 23. The M&M's spokes-candies were furloughed indefinitely, casualties of the culture wars. A human being, comedian/actor Maya Rudolph, was named pitch-person for the iconic candies that "melt in your mouth, not in your hands."
The switch resulted from Fox News's Tucker Carlson's woke claims. For months, the TV pundit ridiculed Mars for switching bits of the spokes-candies' attire and adding inclusive 'personnel' to the group.
For example, Carlson snickered when a female-voiced purple M&M spokes-candy debuted. It's "obese," Carlson said. Another of his barbs targeted the green M&M spokes-candy, which donned sneakers, eschewing knee-length boots.
(Do M&M's have knees? OK, we concede Mr. Peanut has body parts. And they're always nattily attired. You never see Mr. P without white gloves, top hat, slacks and spats. He'd be unrecognizable in a sports jacket and jeans. And, true, without square pants, SpongeBob probably is just another underwater fry cook.
So, apparently animated characters and mascots/spokespersons should cover their privates. Even A&W's Rooty the Bear, sympathizing with M&M's, no longer is bare. The Fox News fashion police aren't happy about this, however.)
PR implications: Sorting such a serious issue requires academic insight. Mars dented M&M's brand reputation, Chuck Byers, marketing professor of practice at Santa Clara University’s Leavey School of Business, tells us. "It was not true to its brand and allowed itself to unnecessarily get sucked [no pun intended] into identity politics."
He adds, "Businesses, particularly those with broad, diverse audiences, need to claim the high ground of defending everyone’s right to make choices that are right for them."
Mars should have reiterated that M&M's is a “fun candy for the entire world,” Byers argues. "The spokes-candies celebrate the wonderful diversity of its customer base and...the fun in everyone’s life."
In sum, "leverage the controversy to reinforce your brand and position, without being confrontational."
As for the pause announcement, coming weeks before the Super Bowl, Byers gives Mars two chocolate-covered fingers up. He calls the tweet pause announcement "a deliberate slow drip, drip strategy [pun intended] to build message frequency."
The platform was Twitter, "so that’s where they 'leaked' it." This "probably increased the aided and unaided recall of the new ad. This is a good example of integrating earned, owned, paid, and shared media."
Tech Jobs and… It’s a sad juxtaposition that as humans lost jobs in tech and journalism this week, Microsoft confirmed news Semafor broke weeks ago. The Redmond-based software giant renewed its partnership with OpenAI, investing $10mln in ChatGPT’s maker. So far, the jury’s out on ChatGPT’s pros and cons for PR work. Problems include nuance, repetition, accuracy and user-friendliness. Yet with Microsoft's millions in the mix, can you imagine chatGPT’s deficiencies lingering?
What Documents? While official DC searches homes and offices for classified documents, another intelligence story hid somewhat quietly under the media radar. Charles McGonigal, who ran the FBI’s NY counterintelligence division, pleaded not guilty Jan. 23 and Jan. 25. Charges include colluding with a Russian oligarch against a rival oligarch. In addition, McGonigal allegedly accepted $250,000 in payments. The cases imply Russia penetrated FBI security. Moreover, it’s possible things McGonigal knew ended up in the Kremlin. Anyone want a PR job bolstering the FBI’s reputation and/or public trust in the intelligence community?
Seth Arenstein is editor of PRNEWS and CrisisInsider. Follow him: @skarenstein