Posted by Tom Allinder on Thu, Jan 21, 2010
Every CEO, management team member and shareholder wants to see their stock become the next hot stock. But, here is where my opinion differs from many service providers and management team members in the small and micro cap stock community.
"What do we have to do to get the stock moving?" I hear so often from other IR types, CEOs and others involved with publicly traded companies. When I ask them about their business, more often than not, I get a long pause before any response. In most cases from my experience it seems that company management thinks- Get the stock going and we can get the business going.
The whole reason that investors and traders buy stocks is not because of the stock, but because of what the company behind the stock is doing. We have seen this time and time again: The companies that have stocks that are successful for more than a couple of days has a good story being told. The stock of any company is a reflection of the investing community's perception of that company- not the perception of the stock.
Now, I know you are thinking: We need to raise money from the sales of stock so we can get our business going. This is true, but think about it- If you have no business or your business is weak, why would anyone buy (and hold) the stock? You can do what many companies do- hire a promoter or short-term IR firm to pump the stock for a day or two to raise some money. Once they are done, then what? It becomes an endless cycle of pump, spend and pump again.
There will always be a market for short term promotion of microcap stocks. However, there is also a growing line of thinking that the only way to be really successful for weeks or months or even years, is to have good brand recognition and a great story being told across the Internet. For a company to be successful over time they need to have:
INVESTORS
Traders are great for short-term liquidity; but companies are built on investors; those that buy and hold the stock over a period of months or even years.
Strategy
Most microcap companies have no strategy at all for intermediate or long term success. Most of the management teams live in an instant gratification world. Instant gratification you may have noticed has caused a lot of trouble over the last 10 years or so.
Developing a strategy for 3 months, 6 months or a year or more is the only way to start to build a story that will lead to a successful company and stock. What should be strategized?
Web Site
It is my honest belief that many company management teams, not just of public companies but private as well think that just having a web presence is good enough; as if an online business card is sufficient. I have ran close to 500 company websites through HubSpot's Website Grader and the average score is still about 45 (out of a possible 100). You need a website that can be found, engage visitors and encourage people to communicate and interact with your company.
News Releases
I have written about news releases to the point of having no fingerprints left and still, most ignore the findings of HubSpot as well as my own research. There is a technique to writing news releases to ensure a maximum chance of syndication in as many places as possible.
The Story
Many stocks have had good runs because they had a "catchy and engaging" website and because they had a steady stream of good news. There is also no doubt that these companies thought their strategy out well and then executed on it. But also, the companies developments were being talked about not just on the message boards but in blogs, on Twitter and many other social media platforms.
The bottom line is that without some sort of intermediate and long term thinking and strategy with the proper help, you may keep doing what you have always done and keep getting what you always got...