For those based in the Gulf and with an interest in communications, the last couple of weeks has been a remarkable story. We’ve watched as the region’s largest construction firm by market value has staggered from one crisis to the next. In less than two months, Arabtec lost over two-thirds of its value – the company’s stock price hit a peak of 7.4 Dirhams on May the 14th and fell to a nadir of 2.61 Dirhams on June the 30th – as well as its CEO and a number of high-profile executives. Where did it go wrong for a company that stated it wanted to be one of the top ten builders in the world?
Undoubtedly, the company’s strategy of transforming from a contractor to a developer and of geographic and sector-based expansion hasn’t paid off during the reign of its previous CEO, the 37 year-old Jordanian Hasan Abdullah Ismaik, who looked to expand the company into the oil and gas and transportation sectors. Ismaik oversaw a US$40 billion dollar agreement with the Egyptian government to build homes in Egypt, and, in a strange move for a Gulf-based contractor, a regional sponsorship agreement with Abu Dhabi-owned Manchester City.
Things began to go drastically awry when rumours spread that Arabtec’s largest shareholder, Abu Dhabi’s Aabar Investments, had reduced its stake in the company. At the same time, the CEO Ismaik had built his stake in the company from 8 per cent all the way up to 28.8 per cent. The story is best told by two reporters at The National, Frank Kane and Hadeel Al Sayegh.
There are some obvious communications lessons to be learned from the Arabtec story, which I hope other companies in the Gulf region will study long and hard.
1) Communicate proactively, stop the rumours: Information on share ownerships seemed to have been leaked out to the market before any announcement by Arabtec itself. While Arabtec didn’t break any rules in terms of non-disclosure, the company could and should have taken a much more proactive stance to explain the share movements made by Aabar Investments, an Abu Dhabi government-owned investment vehicle, and the CEO himself. What was inexcusable was a lack of clarity following a “temporary system glitch” at the Dubai Financial Market, which erroneously reported a drop in Aabar’s stake in Arabtec from 18.85 percent to 14.32 percent. The rumours took over, and filled the void left by a lack of information and analysis.
2) Use the right channels to communicate: As Arabtec’s share price dropped, the CEO announced he was quitting his role. With the stock still heading south, Ismaik announced his resignation. However, this wasn’t announced by the company through a statement to the media or to the stock exchange, but rather by an interview with a newspaper. Again, while Ismaik or Arabtec didn’t break any of the Dubai Financial Market’s rules (which must be reviewed after this sorry debacle), the fact that he announced it himself struck the wrong tone and sent out signals to investors that something was wrong. No information has been forthcoming on his own 28 percent stake in Arabtec, apart from he is willing to sell.
3) No matter the mess, get your story out there: As soon as Ismaik was out, so too were many of his executive management. The company’s head of mergers and acquisitions, Shohidul Ahad-Choudhury, was fired, as were hundreds of employees, including numerous managers. The only comments in the stories that followed were from analysts who were asking, quite rightly, what is going on. It would take eight days before Arabtec would respond to the media at a press conference.
4) Don’t lose your communications team: Whether you like their advice or not, your communications team are essential in a crisis. According to what I’ve been told, Arabtec lost both its head of communications as well as its agency during the past two months. Arabtec’s management should have moved to stem the rumours and controlled the narrative before taking any action re the communications setup, which I hope would have included a more active social media approach (Arabtec’s last tweet from its @ArabtecHolding account was in March).
Reputations that take years to build can be destroyed in a matter of moments in today’s era of information. There’s little excuse for any listed company for not sharing information with shareholders, especially during a crisis. Arabtec has since recovered some of its share value, but the company still has a long way to go if it is to win back investors. Communications is vital to this process. Let’s hope that Arabtec’s new leadership are able to learn some lessons from the past two months, and proactively engage through a systematic communications approach, with strong narratives that lead nothing to the imagination of their investors.