Rumors feed on denials. On November 16, 2024, two YouTube channels posted videos claiming that Lotte Group faced the risk of breaking apart. The next day, a condensed version circulated as an unsigned tip sheet across brokerage circles and online. The material was reported to claim that Lotte Group could declare a payment moratorium in early December and would cut more than half of its total workforce.
On November 18, Lotte Chemical (011170) fell more than 10%, while Lotte Corp. (004990) and Lotte Shopping (023530) each dropped about 6%. All three stocks hit 52-week intraday lows. It came one day after the tip sheet spread and two days after the videos went up. At around 12:30 p.m. that day, the three companies filed clarifying disclosures stating that the reported liquidity crisis was groundless. Responding within a day of the tip sheet's circulation can hardly be called slow.
Even so, the shares closed sharply lower that day. A denial is an answer, not evidence. A company can say that nothing of the sort is happening, but proving that something did not happen is difficult. Without grounds to verify, the market leans toward risk.
Silence is not an option either. A denial has to be issued. But a denial alone settles nothing. Denials can be produced faster than verification materials. So they always arrive first, and they always arrive alone. If nothing follows, a denial amounts to little more than mentioning the rumor one more time.
Domestic research on corporate rumors has observed a similar pattern. Rebuttals worked against rumors about products, but for rumors about the company itself, denial and silence produced little difference in outcome. In other words, there was scant gap between saying it is not true and saying nothing at all.
Rumors do not die from rebuttals. They die from numbers. More precisely, they die from verifiable facts — and in capital markets, the most powerful facts are usually numbers.
On November 21, Lotte released liquidity figures including total assets, real estate values and available deposits through an explanatory document. On November 27, it said it would pledge Lotte World Tower to banks as collateral to shore up the credit of Lotte Chemical's corporate bonds. The following day, it held a briefing for institutional investors and laid out plans for asset revaluation, sales of low-return assets and reduced investment. That was the moment it moved from denial to documentation.
The company denied the rumor within a day, but nearly 10 days passed before it produced a collateral arrangement and concrete self-rescue plan that the market could take seriously. The rumor grew in the meantime. The speed of crisis response is not the speed of issuing a statement. It is the speed of producing grounds.
Lotte Corp. asked police to investigate, seeking punishment for whoever wrote and spread the tip sheet. Whether such a request leads to actual punishment is a separate matter. Even so, the step is necessary. Legal action speaks through posture, not outcome. In a crisis, what a company does not do also reads as a message. If a company takes no action against serious false information, the market begins to doubt its will to respond. In crisis management, going on the offense is part of the defense.
There is a domain where words create facts. Liquidity is one. When talk of a cash crunch spreads, banks pull back and business partners rush to collect payments. Cash can then genuinely dry up. The rumor turns itself into fact.
This is where a rumor crisis parts ways with other crises. In many crises, the facts come first and the words follow. But in a rumor crisis, the words can come first and the facts follow. In this kind of crisis, being late means losing.
Chief executives should be asking themselves in ordinary times: if a groundless rumor about our company spreads tomorrow, what numbers can we put out within hours? And whose drawer are those numbers sitting in right now?
The material to be produced in a crisis has to exist before the crisis hits. The maturity structure of borrowings, the current value of assets held, the amount of cash that can be mobilized immediately — in normal times, no one asks for these numbers. But starting to compile them on the day a crisis breaks is already too late.
Do not argue with rumors. Put out the numbers.
