The 4 reasons Jefferies beat the rumors

Sure, the positive comments today from Meredith Whitney helped, but give Jefferies (NYSE: JEF) credit for handling its communications well in a very challenging environment.  At one point the stock was down 20 percent as rumors swirled about the firm’s exposure to European sovereign debt and a downgrade by Egan-Jones.  By day’s end, however, the stock had recovered nearly all its lost ground.  Here were the four reasons Jefferies was able to beat the rumors:

1.  They moved fast.  Jefferies put out its first statement early in the afternoon, while markets were open, instead of waiting until after they closed.  That showed management’s confidence in its business and risk reporting.  (One wonders, in hindsight, if MF Global had the ability to grasp its firm-wide risk position so it could even have considered such a move.)

2.  They were specific.  Rather than offer bland generalizations, Jefferies provided specific information about its exposures, by country.  It also gave figures that were current, rather than pointing back to month-old data in regulatory filings.  New, relevant information helps investors, plain and simple.

3.  They responded, again.  When additional questions about possible CDS exposures and a regulatory probe arose, Jefferies issued a second statement.   This addressed a common investor fear that firms use carefully worded statements to address some issues and avoid others.   Jefferies was willing to address all questions.

4.  They spoke to the press.  Jefferies officials were wiling to speak to influential reporters, like CNBC’s David Faber, whose tweets and on-air comments helped amplify the firm’s statements.  This strategy was much more effective than a conference call or news briefing and carried much less risk.

These guidelines helped turn around a damaging situation for Jefferies and are a good reference for any firm caught by rumors.


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