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JeffCorbin
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Jeff is Chief Executive Officer and Managing Partner of KCSA Strategic Communications. Jeff brings more than a decade of integrated investor relations, public relations and marketing experience to help clients grow their businesses. Most notably, Jeff has developed financial communications... More
My company:
KCSA Strategic Communications
My blog:
KCSA Blog
My book:
Investor Relations: The Art of Communicating Value
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  • Mark Zuckerberg Speaks, First Time Since IPO: Good Start – But Investors Need More

    Mr. Zuckerberg made his first public appearance since the Facebook IPO debacle this week at TechCrunch's Disrupt Conference. He spoke pretty candidly about his mobile strategy (and the fact that it was in "a pretty bad place" 6 months ago…). He dismissed the idea that Facebook was going to jump into the telecom business and offer a smartphone option.

    I commend him for finally getting out and speaking publicly. This is the job of the CEO of a publicly traded company.
    Nevertheless, it's too bad that he and his IPO underwriting team didn't acknowledge the mobile situation (or lack thereof) back on May 18th when the stock started trading (or back in February when Facebook submitted its S-1) - maybe then billions of dollars in market value wouldn't now be lost. Of course that would also mean that hundreds of millions of dollars wouldn't be in the pocket of Mr. Zuckerberg. Oh well - C'est la vie!

    While his appearance this week was a start, Mr. Zuckerberg needs to continue to do a much better job of communicating the company's strategy for building Facebook AND making money. To say "we are working on it" isn't going to help add value. Only when the market can see tangible results predicated on a plan being executed upon, might the company's stock have a chance to rebound. Based on everything I've seen and read, I don't believe this will happen for quite a long time.

    Sep 13 3:47 PM | Link | Comment!
  • My Letter To Mark Zuckerberg

    Facebook has made it through its first earnings season. Battered and bruised but still alive. After listening to the Facebook earnings call and carefully studying its first earnings report and listening to the fallout from investors and the press, I sat down and wrote Mark Zuckerberg a letter on what he can do from a financial communications standpoint to stop the bleeding.

    Dear Mr. Zuckerberg:

    Several months ago I sent you and Mr. Ebersman by FedEx a copy of my recently published book on investor relations, Investor Relations: The Art of Communicating Value. As an investor relations professional for more than 15 years, I know what you were going through as you were preparing for your IPO and therefore maybe you didn't receive it or have a chance to read it. So, I am enclosing another copy.

    Given what has transpired with your stock since the IPO and given the reaction of the investment community to your first earnings as a public company, I thought I would share with you some thoughts on what you can do to improve the situation. There is undoubtedly a credibility issue that exists with Facebook for a multitude of reasons which have been well publicized by the media so there is no need to repeat them now. The crux of the issue is one which my book addresses - what Facebook is communicating publicly is not supporting the valuation that you went public with, nor the company's valuation today.

    So here's what should be done before more investors buy stock in your company only to find out that they bought in against the well known principle of buy low, sell high - or, for that matter, to ensure that current shareholders don't continue to sell. I have consulted with my staff of nearly 20 IR professionals who have represented hundreds of publicly traded companies and have decades of experience. I hope the following is helpful.

    1) Consider the words you say and how they are positioning Facebook. Based on the conference call, Facebook's main revenue is built around an advertising business model, which shares some similarities to Google's revenue model. So, why should Facebook be trading at 8x analysts' estimated 2012 revenue of $4.9 billion when Google has been public for a much longer period of time but only trades at a 4x multiple?

    In order for Facebook to deserve a higher multiple, it needs to explain more specifically why its growth rate will be higher. General statements about a hopeful mobile strategy, just won't do it and this is a probable reason for the stock's recent decline.

    2) You need to be more specific about future milestones and how you are going to accomplish your goals. You need to lay out benchmarks for execution that investors can follow. As investors, we need to know about your business plan so we can gauge your ability to execute successfully. If you properly communicate this roadmap for growth, you will be rewarded with an appropriate valuation and appreciation from your shareholders along the way. If you don't, your valuation shouldn't improve and your company will continue to be criticized by the investment community and the media based on their own expectations.

    3) Don't wait until your next quarter earnings to tell us more. As I said before, Facebook has a credibility issue from an IR perspective. And, with 1.7 billion shares coming out of lock-up by the end of 2012, you need to do something now to stop the bleeding. Here's what you should do:

    a) Host an investor day on the Facebook platform and invite EVERYONE, not just institutional investors. Revise your presentation so it offers more details about Facebook's mobile strategy - from a business, not philosophical sense. This can be done without sharing any trade secrets. Investors understand and respect trade secrets, and just want to know what the business plan is to make money. Give a conservative timeline of what's going to happen in order to accomplish this business plan and the important milestones. You can then substantiate what you are saying by issuing press releases along the way.

    b) Use the Facebook platform to host the presentation and show the world the many reasons why your company is so special and important. You don't have to take questions orally - give investors the opportunity to send their questions electronically and be prepared to answer the ones that are the most important and least confrontational. Ignore the ones from the disgruntled investors. Keep the "call" to no more than an hour and make sure your IR team is prepared to respond to every question after the presentation. (Many responses will be the same so this shouldn't be as onerous as it sounds.) I can assure you that this will go a long way in restoring the IR credibility of the company.

    4) As a follow-up to the call, prepare a thoughtful, short and insightful letter to shareholders. Make sure it lays out the essence of your business plan as discussed above. You should expect that the media will get their hands on the letter so consider this in the words you use. But remember, this exercise is all about rebuilding credibility and setting forth a business model that justifies an appropriate and fair valuation.

    5) As the CEO of Facebook, you should embrace a strategy for speaking with your investors, particularly the individual investors, many of which have a large portion of their savings and retirement accounts in your stock (either through direct purchase, mutual funds or their 401k accounts). You owe it to them to make them feel comfortable that you are in charge and that their investment will pay off. I suggest you create a video that can become viral (again through the Facebook platform) in which you share your empathy for the fact that every investor is important and that you recognize that one of the reasons they have invested in Facebook is because of you. Generally speaking, people invest in companies because of (1) an opportunity for growth (and to make money), and (2) the fact that they believe in the company's leadership and its ability to deliver results. Consider the behavior of great CEOs like Jack Welch, Steve Jobs and Lou Gerstner.

    6) Even though it might be difficult, you should give some sort of financial guidance. LinkedIn gives a full-year outlook. This is what helps to justify the higher multiple. Absent it, there is a perception that a company doesn't have a grasp on where its business is going.

    7) One last thought for now - involve your mobile strategy senior manager in the investor discussion. During your conference call, you put out a metric for investors to follow and to gauge your success. You said that we should follow the advertising revenue derived from sponsored stories and news feeds, which was generating $1 million a day by the end of June, half of which was from mobile. Investors will be keeping an eye on this metric so it will help to involve in the conversation with investors the person responsible for delivering on this. Given the expected growth opportunity, this is where you will be able to justify a higher multiple of revenue than Google.

    If I can offer you one piece of strategic advice (the above are merely tactics), remember that the numbers speak for themselves. They are what they are and don't lie. It's the commentary around the numbers that really explains what they mean and ultimately justifies a higher growth multiple and valuation.

    Again, I hope you receive my book and that it is helpful in the coming quarters and years.

    Sincerely,

    Jeff Corbin

    CEO

    KCSA Strategic Communications

    Aug 07 2:35 PM | Link | Comment!
  • Diary Of An IPO: The Facebook Quiet Period Is Over

    For the past month, I have followed Facebook's lead and remained quiet during the "quiet period." The reason for this was there was nothing to say. Everything that needed to be said was already said, and Facebook hadn't put out any news of major business importance.

    The quiet period is essentially a "cooling-off" period in which a company going through an IPO must be silent, so as not to inflate the value of its stock artificially. However, the SEC said that, notwithstanding the quiet period, issuers are permitted to continue to publish "factual business information."

    Does the fact that Facebook didn't put out any news suggest that nothing took place in the company during the past month? Or, was the quiet period an excuse for remaining silent just because they have yet to figure out their communication policy as a public company?

    Well, today the quiet period officially ends, and so does my silence. I am anxiously awaiting the analyst reports from the banks that helped take Facebook public - especially Morgan Stanley who led the deal. Once I get my hands on the reports I plan to compare them to what was in the prospectus. Theoretically, they should be the same. Under Reg FD, how could they not be? Unless someone was privy to information not made available to everyone.

    I will be looking very closely at how the analysts model Facebook and if they can possibly justify an IPO valuation upward of $100 billion. Or, it will be interesting to see if their valuations are more in line with the company's current valuation of less than $70 billion.

    Once I have a chance to review, I will report back on what the analysts say and what investors should be looking for before investing more money in Facebook. In the meantime, I recommend that everyone subscribe to the company's IR alerts (I subscribed immediately following the IPO but have only received one alert indicating that Ms. Sandberg was named to the company's Board of Directors - very significant news). Let's see how many alerts we receive. This is the information that theoretically should demonstrate how the company is going to grow its business, revenues and profits; how it is going to diversify its business model beyond advertising; how its advertising business is really doing; how the company will monetize its mobile platform that in my opinion is lousy; how it intends to communicate with those like me and you and whether there is a chance that it will be transparent with investors; and how it intends to behave like a public company and treat the investment community with the respect it deserves.

    The quiet period is over. This can no longer be an excuse for the failure of Facebook to communicate. The company's investor relations have been disgraceful to date. But, the opportunity still exists for them to turn this around.

    Stay tuned.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 27 5:12 PM | Link | Comment!
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