Most Financial analysts (Buy and Sell Side) are likely aware of the inquiry from the SEC into your company. Your Investor Relations organization has to be:
a) Proactive about communicating
b) Forthright with what they know and dont know
c) Resist speculating the outcomes and possible causality
d) Be clear about timelines and milestones
e) Be honest about impact to employee morale, customer momentum and partner/supplier concerns.
Address these questions below in a clear, concise manner and you will have a better crisis handling experience:
1. Will the restatement have a material impact on your previous years earnings, revenues and cash flow, balance sheet, etc.?
2. What is the extent of the options backdating? How many instances and how long was this going on?
3. Have you formed a special committee to look into the matter? Who in the Board of Directors is heading up the audit committee? What experience do they have in dealing with crisis of this magnitude before?
4. What has your reaction from empoyees been? What actions are you taking to prevent mass exodus?
5. Are you going to lower earnings estimates and revenue targets since management will be distracted to solve this issue?
6. What are implications from a legal standpoint? How exposed are your Directors? What is the level of your DOE insurance?
7. What about customers? Are they concerned and what is their level of concern?
8. When do you expect to complete this process of investigation? What are the key milestones we should track?
9. Who all are going to be fired / let go because of this issue?
10. What is your process to continue ongoing communication with us on this issue?
Your IR and Finance team will not have all the answers, but these questions need to be brainstormed before you have the call with the analysts.
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