Open Your Mouth, Lose Your Money.
The Magic of Restraint
Yesterday, one of the world’s coolest companies faced disaster, said nothing, and recovered with grace. Today, one of the world’s best-known companies caught some good luck, opened its mouth, and now faces disaster.
As we nerded out over the best Indian food I’ve had in years, we shared laughs and incredulity over GoPro’s ungodly stock plummet of 12 percent. The nosedive happened yesterday when trading volume doubled after Apple was awarded a patent for wrist-mounted remote control digital camera systems earlier that morning.
That’s right: A single patent… in a single country… by single a company… with over ten thousand other patents… most of which will never see the light of day… with no extant interest in this product class… derailed another company’s stock with its steepest drop since August.
Raj interpreted this as a sign of the public market’s “extreme volatility these days.” Though the market is on an upswing — having set several historical records this last year — he’s not necessarily wrong. But in between bites of Saag gosht, I proposed another theory: it’s not so much economic volatility as information volatility. Though the result is often similar, the speed with which a hyperconnected information economy exposes and propagates tide-turning information — such as the granting of a patent — has made market trends even more variable. Think of it like EMH 2.0.
In theory, this also works in reverse, because publicity has high entropy. If information can tank a stock, it should be able to un-tank it. Masterful PR, for instance, should be able to “cash in” on brand capital through confidence-building public statements.
And yet: yesterday, the typically very outspoken, high-touch voice of GoPro’s PR division was entirely silent. Not silent as in “no comment”, but silent as in “Does GoPro have a PR division?” (Apple was also most silent, declining comment through the oft tight-lipped Kristin Huguet.) And look at GoPro’s stock today:
Though not trading near an all-time high, it’s clearly on the rebound, even above where it did during the symbol’s momentum of Q3 2014. Furthermore, the media seem to have forgotten GoPro’s misfortune just a day later. In other words — though obviously oversimple — it would appear GoPro’s PR restraint paid off.
Yet as Raj got to work on his Tandoori naan, our conversation shifted to the tech stock news of today: Blackberry and Samsung’s rendezvous with risk and rumor. Here’s how it went down: Reuters filed a report earlier that Samsung (the #1 global smartphone maker) had approached Blackberry about a potential strategic takeover. Reuters cited “a source familiar with the matter” and “documents seen by Reuters”, as well as the fact that Blackberry and Samsung formed a high-profile security partnership in November 2014.
Other analysts fueled this clamor over the next few hours, as in Bloomberg BusinessWeek’s “Here’s Why Samsung Would Want to Buy Blackberry” and the Economic Times’ “Samsung in Talks to Buyout Blackberry for $7.5 Billion”.
As these reports went online, Blackberry’s shares skyrocketed a bullish 30 percent — a jump the corporation hasn’t seen in a long time. Raj and I cued up the sparkline; it looked something like this:
At end of session, Blackberry’s stock closed at an incredible $12.59 — it’s highest price since June 2013. In other words, nominally speaking, Blackberry Ltd. had its best trading day in over a decade.
But, of course, the story doesn’t end there.
Indeed, this evening, Blackberry decided to vociferously deny the earlier reports of takeover talks with Samsung. Their statement began:
“BlackBerry has not engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry.”
All they had to do was keep their mouth shut.
As we shifted from entrées to rice, Raj suggested something like: “Our policy is to refrain from comment on rumors or speculation.” I reckoned they’d have done equally well with, “Our spokesperson is unavailable for comment.” Or even “no comment.” No comment might have fed the bountiful mystique! Blackberry could be flying high right now!
Instead, they’re in the dumps. Take a look at after-hours trading:
Blackberry yielded tons of golden ground — and then some — to the tune of -14% (-16% local min). Yup: On what could’ve been its best trading day in 11 years — fueled by natural market speculation about which it could’ve remained taciturn to the benefit of its desperate shareholders — the world’s most famous floundering company opened its mouth and paid the price.
Of course, Reuters hasn’t retracted it’s report — quite the opposite — so there’s more to this story yet. But there’s a lesson here regardless: Yes, publicity has high entropy — and sometimes restraint is the better path. Whereas GoPro and Apple kept quiet to their mutual benefit, Blackberry and Samsung haven’t learned the most important rule of PR:
Sometimes, it really is best just to say nothing. ∎