Don’t cry “collapse”

One of the first things you get taught in business journalism is to get the facts right. For example, you don’t write that a business has collapsed unless it actually has.

And a “collapse” in business journalism means that receivers or administrators have been called in, or the company has ceased operating.
And there is good reason for this caution. When a media report says a company has “collapsed”, when it is still trading, it can have enormous ramifications.
Customers stop buying. Suppliers withhold goods or demand cash only. Financiers get edgy. Shareholders demand to know what’s behind the report. In fact, irresponsible reporting can cause a company to collapse, especially in this nerve-wracking environment.
Yet twice last week, the Fairfax press reported that PR and marketing company CommQuest had “collapsed”.
Here is what Stephen Mayne wrote in The Age and other Fairfax press about William Scott and CommQuest on 28 April: “There are a few salient lessons to be learnt from the CommQuest collapse.”
And then last Friday, he followed it up with this comment in his newsletter The Mayne Report: “Will Scott destroyed value with his bone-headed Paris Hilton party, and now he’s completely in denial, claiming the company hasn’t ‘collapsed’, when the shares have been suspended since 23 March.
“ANZ isn’t letting Will spend more than $500 without explicit approval because CommQuest has breached its banking covenants and clearly looks insolvent as this fire sale of its businesses unfolds,” the report stated.
“The latest quarterly report was released last night, and CommQuest burnt through another $536,000 in cash from its operations, while the ANZ is still owed $25.9 million. This thing has ‘collapsed’ in everything but name.”
According to Mayne, not only has CommQuest “collapsed”, but it “clearly looks insolvent”. That means the directors are breaking the law, as last time I looked (at lunchtime today) CommQuest is still trading.
Will Scott has been quite frank about the trouble he is in. He has told SmartCompany he is uncertain about the future, that he has not had to call in administrators yet, and that he is doing everything he can to try and salvage the business and hundreds of jobs.
The company might not make it, and shareholders – of which Mayne is one – could lose their dough.
But the point is, it hasn’t happened yet – and it may well NOT happen. And while it is still trading, it is totally irresponsible to report the company has collapsed and to make suggestions it is trading insolvently without a hell of a lot of proof.