When publicly-listed companies miss their revenue forecasts, as Wynyard Group and Orion Health both did recently, the stock market generally responds by discounting the share price. That's because the 'value' attached to the business is a mathematical calculation involving both current inherent value (generally represented by customers, intellectual property and other assets) and future value (expected revenue).
Knowing this, some companies announce somewhat optimistic forecasts, both to challenge sales and delivery teams, and to send signals to the market. When forecasts are achieved, everyone is happy. However, if forecasts are not met, the natural reaction of the market is to back out the value. Sometimes the market reacts quite strongly, especially if the share price has climbed significantly on the back of optimistic forecasts, press release statements and marketplace hyperbole. This raises some interesting ethical questions:
I don't have any strong views on these questions at present, other than to suggest they seem to be important to the smooth functioning of the market. Therefore, they probably deserve some air time. Depending on the responses to these questions, I may initiate some further research and develop some recommendations.
Thoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention.