Weeks of pain began for the swashbuckling cryptocurrency industry on November 2, 2022, after CoinDesk revealed balance sheet woes for Sam Bankman-Fried’s trading firm Alameda and crypto exchange FTX. By November 11, both had filed for Chapter 11 bankruptcy and even the prices of crypto companies with no connection to Bankman-Fried’s companies were plummeting.
“At first, it was terrible, and it really did catch us by surprise,” recalls Sue Ennis, Head of Investor Relations and Vice President of Corporate Communications for Hut 8, a Toronto-based miner of Bitcoin.
With retail investors owning 55% of Hut 8’s shares, Ennis knew that communicating proactively was a must. “We couldn’t stay quiet because retail investors don’t handle silence well,” she says.
To reach retail investors, Ennis engaged with the YouTube community, explaining that FTX had no effect on Hut 8’s business and its downfall “was a centralized platform issue, not a decentralized cryptology issue.” She made similar points in a press release and by contacting analysts covering the company, offering to connect.
“Part of the strategy was just being armed with very transparent information,” says Ennis. “We focused on a positive spin and were authentic and candid. Our position was that getting rid of grifters in a nascent tech industry is good.”
News bombshells rock many public companies at one time or another. For those tied to Russia or Ukraine, Vladimir Putin’s invasion on February 24, 2022, was that time. And for uranium and nuclear companies, it was the 2011 Fukushima disaster in Japan.
“Whether you’re a crypto firm or a mining firm, if your industry is in crisis, it’s incredibly important that you communicate with your customers now,” says Jeff Angel, Principal at the Centre for Crisis & Risk Communications in Calgary.
“How do you handle a crisis that’s not yours, but everyone thinks is yours?” asks Angel. “You handle it just like
it’s yours.”
Plan Ahead
On January 23, as Fiona Grant Leydier became Vice President, Investor Relations and Corporate Marketing, for Silver X Mining, she knew trouble was brewing. The Vancouver resource company’s main asset is in Peru, where social unrest was spurring some major mining companies to halt operations.
“In a crisis, things can be very fast moving,” says Grant Leydier. That’s why she’s convinced “it’s important to have a template – or a plan in place – that tells you the chain of command and how to respond to different scenarios.”
Grant Leydier relies on the company’s Peruvian-based external communications agency to gauge sentiment and help with cultural nuances. Even so, she’s spent much of her first weeks in her new role drafting response materials.
“We don’t want to be challenged to write something when cortisol levels are through the roof and everything needed to be done yesterday,” she explains.
Laura Kiernan, CEO of High Touch Investor Relations, agrees: “One thing I advise IROs to do when there aren’t headlines is to ask what you will do when there are headlines. When things are calm, cool, and collected, you can think through your strategy.”
A good model for drafting a crisis response is the political war room or a space where executives can practice responding to a variety of angst-producing possibilities, says Kiernan. She notes that a surprising amount of preparation can be done in advance. For instance, she points out that some oil companies design websites that stay dark but are ready to go operational should, say, an oil rig capsize.
Angel also emphasizes the need for prior planning, given how swiftly news of a disaster spreads. He points out that it was less than 50 seconds after two bombs went off at the Boston Marathon in 2013 that reports of the tragedy hit social media.
“Understanding how the brain reacts under stress is critically important when communicating to an audience in a crisis,” says Angel. His organization’s template for crisis communications, called the Rule of Three, revolves around the neuroscience finding that a listener under stress has the ability to process no more than three informational nuggets. (That’s why, he explains, the phone number for emergencies was pruned to three digits, or 9-1-1.)
According to Angel, an IRO should make no more than three concise points about how his or her company is responding. Ideally, these points will be conveyed in 27 words or less – and in a maximum of nine seconds.
Findings from neuroscience also inform Angel’s advice to lead with empathy. Here, he suggests that a speaker begin by saying how heartbreaking it is that an accident has taken place, and/or that people have lost their hard-earned savings.
Finally, a skilled crisis communicator will close with a statement of optimism about the future.
Consider Your Audience
“Generally, companies will get the benefit of the doubt from investors, but in order to get that benefit, you’ve got to be straightforward and honest,” maintains Martti Kangas, Partner at Proconsul Capital in Toronto.
Seasoned IR practitioner Isabelle Adjahi, Vice President, Investor Relations and Sustainable Development at The Lion Electric Company, agrees. In a crisis, she adds, it’s important to remember that “what you say you can’t take back.”
Adjahi’s crisis-communications skills were tested in 2011-2014, when she headed IR for Montreal-based engineering consultant WSP and a government commission issued a report criticizing the Quebec construction industry for widespread corruption. Listening to the radio en route to work one morning, Adjahi learned that police had raided WSP’s offices.
“You need to have a crisis plan, even if at the end of the day, you cannot predict any of the crises you will have,” says Adjahi. Next, tailor the message to your three key audiences: employees, the media and investors.
“Talk to your employees first,” advises Adjahi. “Remember whatever you tell your employees, you have to assume will be published somewhere. So, you need to make sure you don’t tell employees anything you would not want anyone else to know.”
When it comes to communicating with investors – the most familiar audience for IROs – emphasize the quantifiable. “Never talk about just the news,” says Adjahi. “We need to add facts: numbers and rationales.”
In addition, Governance Lawyer and Consultant Carol Hansell stresses the importance of carefully timing a company’s message to investors.
“As things are emerging,” she says, “you don’t want to disclose too soon because the act of disclosure sends the message that what’s happening is a big deal.” Hansell encourages IROs to coordinate closely with the disclosure committee, as well as with members of the senior finance team, communications, and the general counsel’s office, to make sure information is released at the proper time.
Walking a Tightrope
IROs take different approaches when it comes to deciding how forthcoming to be.
Grant Leydier, who says that 80% of her social-media strategy focuses on education, has wrestled with the pros and cons of proactively addressing the political situation in Peru.
While she’s keen to inform the market about developing events, what she calls “the investor relations side of her” resists: “I tell myself: ‘Hold on. Let’s be careful about what we say. We don’t want to be perceived in Peru as taking any sort of political stance.’”
Adjahi also errs on the side of caution. “In a crisis,” she says, “the last thing I would want is to become the spokesperson for the industry. Once you do that, even if you’re not in front of the press directly, you start getting all the questions.”
She continues: “It’s important at some point to be able to say ‘no.’ With journalists, the more you feed them, the more they want.”
In contrast, Ennis sees enormous benefit in putting oneself out there on social media, an arena in which attention of all stripes is generally good.
“After FTX, we took the position of educating,” says Ennis. She found historical examples from the past hundred years of norm-busting industries from the railroads to the Internet to mortgage-backed lending; she explained that often when a group of elites hold concentrated power, abuses follow.
“We try to help investors and the media parse out what’s real and what’s misinformation,” she says. “The strategy we employed with FTX was to remind investors that this is not a new phenomenon. We’ve seen this happen with nascent and Wild West industries before, and in the end, these industries actually benefited by increased regulation and increased transparency.”
No matter which path an IRO takes, the good news is that most crises do eventually subside. By mid-February, investors had all but stopped calling Ennis about FTX.
“Now that the pain has been felt and a bunch of companies went bankrupt,” she concludes, “there’s a Renaissance of interest coming back.”