Poisoning the Well

Yesterday I received an email from a client with whom we enjoyed working in 2006. (In point of fact, we enjoy working with all our clients, and at least in part that’s why we love our jobs so much.) Apparently it was time to get a fresh valuation.

Occasionally I am aghast at what I hear coming out of the mouths of otherwise intelligent people. Case in point, the email I received yesterday. It read:

Hello Bo,

I hope that this note finds you well. Just a quick note to let you know our company has taken on another round of funding. With that funding, we would like to do a re-valuation once again on our option price, preferably in the $0.30 range. May we contract with you to undertake this?

Kindly, Dick

You gotta be kidding me. You simply cannot ask a valuation analyst – even the sales guy – to target a specific price! You know that! No? Please allow me to make three points to make it perfectly clear:

1. The numbers speak for themselves. This is the practical side of the matter. Now, on to ethics.
2. Our professional judgment is not swayed by a client’s desires. Arcstone’s desire is simple: to build a bulletproof analysis and protect our clients from the risks of noncompliance. Not to hit their desired number. Guess what? We’re darn careful about adhering to the ethics of our industry.
3. No matter how strong our ethical fabric, our analysis must not appear to have been influenced by the wishes of the client. The “truth” of our impartiality is in the eye of the beholder. Ahem, people, we’re dealing with some cynical beholders.

In this case, I’m afraid the client poisoned the well. A simple email made it impossible for us to get comfortable with serving this company again. It’s the appearance of influence that makes us uneasy in this case: if, after a thorough and unbiased analysis, we naturally came to a conclusion that pointed us to a $0.30 strike price, we would still appear to have been guided to that number. That’s a bad situation for us and our client, and we have to beg off.

This individual lost an opportunity to work with us again, and we lost an opportunity to maintain our relationship with one of our valued clients. I’m sad for it. So friends, wake up! Don’t make this mistake yourselves.