Darren Seed, F.CIRI
Is the Wealthy Barber defining capital markets these days? Does slow and steady win the race? Should you keep (contributing) your money in a high-interest-bearing account? Or perhaps there is another barber phenomenon at play? And what the &$%! does a barber have to do with IR?
A current reality is that a high-interest rate environment can create investor distraction from said investors investing in small-cap companies under a perceived risk/reward psychology. In fact, one could argue that high-interest rate environments could distract investors from micro, small and perhaps even midcap companies!
Consider the press and investor following of the massive Magnificent Seven stocks: Nvidia, Tesla, Amazon, Microsoft, Apple, Alphabet and Meta Platforms. This following has driven phenomenal attention to these multibillion-dollar companies. Will these market successes drift down the market cap slope? Sure. So, let’s look at some ways to prepare and benefit from a positive macro market vibe moving down into micro markets and how we can all reach out to new investors.
For over 25 years, I have worked with and within companies ranging from $20 million in market capitalization to over $2 billion in market capitalization. For this article, I am going to focus on the smaller market capitalization scale. Sort of.
I will focus on four out of dozens of IR and capital market subjects where I have seen incredible success and watched equally disastrous outcomes: disclosure controls and related policies, social media and AI. I will also touch upon investor outreach for small-cap companies. If CIRI invites me back after my use of some harsh language and sarcasm, I’ll cover other subjects in the future.
Lastly, I will attempt to connect a barber and an IRO…
For those of us driving best practices in IR, disclosure controls are critical. Ensure there is a disclosure policy, a disclosure committee, and/or some internal process that governs your public company’s disclosure practices. A tip: schedule a dedicated Zoom or Microsoft Teams meeting weekly or biweekly. At a minimum, create a specific checklist for news releases your company is planning to issue. This ensures that disclosure requirements are managed and taken seriously. I have uploaded a generic disclosure checklist to CIRI’s website so please feel free to have it, use it, or ignore it.
After running countless disclosure committees, I can assure you that there may come a time when a regulatory body may inquire into your disclosure(s)! It may ask for any relevant minutes or related disclosure control systems you have in place. A tip: for minutes, applications such as Google Docs or other shareable content creation tools are an efficient way to manage access to disclosure committee members. Just be mindful of the list of participants who can access the online documentation.
Let’s move on to the exciting subject of social media and IR. First, it is a great idea to familiarize yourself with the multiple social media platforms, if you haven’t already. CIRI’s IR eLibrary is an excellent online resource, including a survey regarding the various social media platforms. Second, in my opinion, the time to leverage large social media campaigns is around meaningful events from the public company, IR’s recognition of the market backdrop, and when these events are supported by a good overall IR plan.
In the last 18 months, there have been sectors that have been out of favour. If your sector is still experiencing this, outside of posting your own press releases and related commentary on social media, be mindful of the limited IR ROI that a large campaign could deliver. Third, look for examples of issuers in your space that are active on social media before considering launching your own campaign. If you haven’t leveraged social media before, look at online portals such as Reddit, X (Twitter) or other social media platforms to see what larger, more active public companies have done and, perhaps, what has worked.
As for AI, it is easy to say that AI is an evolving tool for IROs. You first must appreciate that AI tools, such as ChatGPT, are using other participants’ online content to help with your request for content. The information you post is not confidential and could be accessed or even utilized by said AI tools to help others. At the recent CIRI BC dinner, I heard of some intranet AI tools that may be helpful in this regard. For now, I would offer that AI can be an option for random content creation. A tip: do NOT include your company name, or specific material content, if you wish to utilize external AI platforms.
Targeting investors for microcap, and especially nanocap companies, is a great subject and could be a lengthy topic alone. What I believe to be important discussion topics include investor database options, event marketing options, and online marketing campaigns.
Investor databases is a tough subject for nanocap companies because many databases predominately identify institutional versus individual investors. Outside of your own public company’s NOBO & OBO list, investor databases can range from Bloomberg, FactSet, and Irwin, to name a few, but again, the direction here is for micro and nanocap public companies. If you’re looking for an investor outreach platform, ask for a related demo that targets your company’s sector and, most importantly, its market cap.
Event marketing can be a good idea to get in front of investors for microcap and nanocap companies. You meet people in person in a speed dating-like fashion. Here is a tip: look at CEM events to get some background for your IR strategy.
Online marketing campaigns can go in many directions, and I am going to suggest looking into this arena for microcap and nanocap companies. In my opinion, if you need to create an audience where ‘broker-direct’ outreach is a challenge, creating an online audience for your company’s success is a good place to start. How? In addition to the social media campaigns noted above, some companies elect to engage third-party service providers to create strategic targeting campaigns. A tip: look at your public company peers and their disclosure(s) with respect to IR campaigns and related expenses. This is a budget-oriented subject. Be careful with this approach as you can spend thousands or even hundreds of thousands of dollars on awareness campaigns for your public company; however, this may not create the benefit you’re looking for.
Now, what the &$%! is it about a barber in IR? There is an age-old saying that when your barber is giving out stock purchasing advice, it is time to get out of the market. When every financial media platform and marketed source of financial information is talking about how awesome and amazing the stock market is, this may be a signal – or even an alarm – that an overall drop in markets could be coming.
So, why should you care? Since the above macro themes can ultimately impact smaller cap stocks, look at your news release schedule, outreach campaigns and related IR budget, and be ready to make changes to maximize your ROI on budget dollars. A tip: watch the financial information networks, financial websites and financial results of your company’s peers. Sometimes the best advice is to watch your IR budget dollars because it’s not about how much you earn, but how much you keep.
Darren Seed, F.CIRI, is the President of Incite Capital Markets and President & CEO of Endurance Capital.