Bank of America’s shot at Henry Blodget is a measure of how influential the blogosphere has now become in the financial markets. It’s also a reminder of the pitfalls of taking on critics publicly in any forum.
For every company that has seen its stock price plummet, the scene within BofA is a familiar one: Shareholders are distraught, the board is urging the CEO to take action, the PR people are under pressure to staunch the bad ink – so the company decides to take a swipe at a critical analyst.
Not so long ago, a public shooting was reserved for analysts at big-name firms or the occasional hedge fund. But today, some of the most insightful – and opinionated – voices are found online, and they’re reaching a wider audience than ever before thanks to the rise of online news sites and social media. So they’re drawing fire from companies in crisis, too.
Blodget, a former internet-stock analyst, is now a prolific blogger who heads Business Insider, a popular business-news website. His remarks questioning BofA’s asset valuations and capital requirements aren’t that different from what other analysts have said, but his platform gives them greater visibility. They clearly stung BofA, and the bank decided to release a statement in response.
There are three principles for public companies to follow if they decide to go after a critic. BofA’s response failed on all counts.
First, don’t make it personal. It’s tempting to attack the analyst but it ultimately undermines your argument and makes you look petty. BofA’s statement included a reference to Blodget’s well-publicized ban from the securities industry in 2003 as part of an SEC enforcement action. That’s simply not relevant to the issue.
Second, be specific. A good response shouldn’t be merely a general complaint – that’s whining. It should call out the analyst’s error and provide data to back it up. BofA called Blodget’s comments “exaggerated and unwarranted” and offered only general data. That’s just not convincing.
Third, be ready for more. Critics seldom go away once attacked. They respond to the response, and often see allies join their cause. A response also makes the dispute more newsworthy, bringing the issues to a wider audience. The BofA-Blodget fight is now a top story in the New York Times. There has been no further comment from the bank.