How do listed companies successfully counter rumors and speculation in the stock market?

A guide to successfully dealing with market uncertainties

Wherever there are share prices, there are also stock market rumors and market speculations. They spice up the everyday life of the investment community: shareholders discuss them, analysts evaluate them, and journalists spread them. Rumors and speculations are sometimes interesting, sometimes funny, sometimes just plain nonsense or a lie.

Either way, they can drive share prices up or down. Accordingly, the temptation to instrumentalize a rumor for one's own purposes is tempting. But beware: the deliberate spreading of (false) rumors is classified by law as share price manipulation and is therefore prohibited and subject to legal action.

But how do you deal with this as a listed company when you are the target of such rumors and speculation on the stock market? How should you react when there is speculation about defective products or services? How should a company respond to accusations that a member of management did not behave appropriately last Christmas? What is the right reaction when the silence of the normally talkative CEO of small company A is evaluated in the media as evidence of the plausibility of this rumor that big company B is interested in A?

Proper management of such situations is critical to maintaining confidence in the financial market. We recommend that the following points be observed:

Communicate transparently and clearly

Provide comprehensive information to give investors an accurate picture of your company. This can be done, for example, through annual and half-year reports, investor presentations, media releases or roadshows. Transparent and clear, unambiguous messages avoid misunderstandings or misinterpretations from which rumors or speculation can arise. Maintain a dialog with market participants, listen to them carefully, and avoid withholding or concealing information. 

Monitor news sources and social media

Today, rumors and speculation spread digitally around the world at lightning speed. Therefore, continuously monitor what is being reported about your company in the media, by news agencies or in blogs. In addition, you should also keep an eye on readers' comments on articles and on social media so that you can react just as quickly if necessary. Ask media representatives to correct factual errors (e.g. incorrect figures) in the corresponding reports. We have compiled further information specific to social media in a PDF document.

Prepare a crisis communications plan and Q&A

We recommend preparing a crisis communications plan that helps you responding effectively in the event of unexpected events. This includes rumors and speculation that cause a significant price reaction in your company's stock. This plan should include responsibilities, communication channels and pre-written statements to ensure a coherent and professional response. In each case, standard documents (Q&A) with pre-approved, generic responses to inquiries about market speculation are also very helpful. 

React appropriately

In general, we recommend that you do not comment on rumors and speculation about your company, and that you do so in response to inquiries, referring to your communications policy. In particularly brazen cases, however, a quick and appropriate reaction, e.g. in the form of a denial, is recommended in order to avoid uncertainties on the market and undesired volatility in the share price development. The denial does not necessarily have to be carried into the market as a formal announcement; in most cases, a few calls to the key opinion leaders are sufficient to nip a rumor in the bud. 

Meeting the requirements of the stock exchange

If, on the other hand, rumors and speculations that have occurred correspond to the facts and their occurrence indicates an information leak, official information is required. This is also required by the Directive on Ad Hoc Publicity (pursuant to Art. 53 LR) of the Swiss Stock Exchange SIX. Ad hoc publicity is intended to ensure that you, as an issuer, inform the public in a true, clear and complete manner about significant events in your field of activity. In the case of an M&A rumor, for example, you would have to confirm whether these discussions have just begun or are already at an advanced stage. 

Consider legal aspects

You may also need to consider taking legal action to protect the reputation of your company or members of its management or board of directors. This includes, for example, speculative media reports and related online comments by readers that contain potentially business-damaging or personality-injuring statements. Even if the media report on facts that have not been legally proven to be true, it may be appropriate for your legal representation to respond if this so-called reporting based on suspicion does not make it clear enough that it is in fact only a matter of suspicion and not guilt in the legal sense (journalists therefore like to use the phrase “the presumption of innocence applies” in such reports). 

Keep calm

When confronted with rumors and speculation, it is important to remain calm and not to become hectic. Emotionally driven reactions could make the situation worse. Instead, respond in a factual and level-headed manner. Because, once again, only the fewest rumors and speculations necessitate a reaction on your part. 

Overall, dealing with rumors and speculation requires a well-thought-out but level-headed approach. Proactive, open, and transparent communication with clear messages helps to reduce rumors and speculation about companies. This strengthens investors' confidence in companies and at the same time protects them from unwelcome market volatility.