Risks of sell recommendations are low, but still …
It's fair to say that investor relations folks are always on alert for sell recommendations. They should be. But it's also fair to say that the risk is not necessarily high. Sell-side sell recommendations remain an outlier.
This means, however, that when a company is hit with a sell recommendation, it is definitely an extra bright red flag in the minds of investors and the public at large. IR professionals, executives and directors can easily be caught unaware.
Case in point: Crocs, which ran afoul of Stern Agee analysts.
The analysts came out "with guns blazing." They told clients to sell because "we believe that key factor that has led to the poor performance at CROX is the lack of senior leadership," as noted by CFO.com.
"The report pointed out that managers of the company's operations in Asia, Latin America, and North America had left the company, and that Crocs had 'burned through' three marketing directors in three years. The reason? A 'rigid internal structure' at Crocs where there is a 'very tight group loyal to the CEO' and all major decisions come from the top. The dynamic has caused 'numerous, talented people' to leave the company, the analysts said."
They also wrote in their report: "We sensed this internal pressure on the 2Q13 call when management had clearly decided to reduce its  store openings from 90 to [about] 60 but refused to come straight out and acknowledge the change."
The company denied the charges. "We've seen the report from Sterne Agree Group earlier today and there are factual inaccuracies," the statement started off. It said it had "general managers or interim general managers in place in all regions except Asia, where our regional GM left the company."
All in all, the IR folks need to ponder how it got to this. It seems like better information exchange could have led to a better outcome. A lot of headaches could have been avoided.
- here's the article