Numerous well-known companies have seen a decline of 60% or more in their stock prices from their recent peaks, all within a span of one year. They include Netflix, the streaming service; PayPal, the online payment company; Moderna, the Covid-19 vaccine maker; Roku, the digital media player; Peloton, the internet-connected stationary bicycle maker; Uber and Lyft, the rideshare companies; Gap, the apparel seller; Zoom, the video communication company; and DoorDash, the online food delivery platform. Some, like Peloton, have lost more than 90% of their recent stock price peaks, a category we call orphan stocks. Strangely, none of these companies are going out of business soon. On the contrary, their products remain in demand, and they retain leadership positions in their fields. So, what has changed, and what can managers of these companies do to bring back shareholder confidence?
Restoring Shareholder Confidence When Your Stock Is Down
Given stock markets’ unprecedented performance during the pandemic years of 2020 and 2021, 2022 should have been even better with recovery from the pandemic and reopening of businesses. But the stock market performance has been exactly the opposite. A few firms losing 60% or more of their value is not an unusual thing — it happens regularly. And it can happen en masse like during the dotcom bust in 2000. What’s unusual about today’s situation is that some of the current orphan stocks — those that have lost more than 90% of their recent stock price peaks — remain market leaders and their products continue to have mass appeal. For example, most of us continue to buy products and services from Netflix, Uber, Gap, Zoom, and Roku. In addition to the challenges of managing day-to-day business operations, managers must take aggressive but thoughtful action to bring back shareholder confidence. The authors recommend several steps to achieve that goal.