By Scott Symons
In the beginning, there was this very energetic, intelligent individual who discovered a great product. All of his friends, relatives and acquaintances told him what a great service he could provide and how much money could be made by marketing this product. Eventually our energetic, intelligent individual — let’s call this person Mr. CEO — decided to quit his day job and take on a job that would have him working both day and night. Mr. CEO didn’t mind this because he was now his own boss and the future for Mr. CEO looked very bright.
Because Mr. CEO’s friends and relatives encouraged him so enthusiastically, Mr. CEO wanted to share his bright future with them. Mr. CEO invited his friends and relatives to invest in this new company. All of Mr. CEO’s friends and relatives were very glad that he asked them to join this new company as investors. They were all convinced that they would all make a lot of money.
Soon the sales began to roll in. Mr. CEO and all his investors decided to get bigger offices and a warehouse. Mr. CEO gave himself a raise and a company car and hired many new people. All of these new people told Mr. CEO how good they were and what a great job they could do for him.
One day Mr. CEO’s new bookkeeper told him, “We’re out of money!! Can you get more?” Mr. CEO talked to many people who said they could raise money for the company. Time went by and the bills continued to pile up. Sales began to fall off and Mr. CEO’s friends and relatives were calling every day because their stock was falling in value. Mr. CEO lost his company car and his big new office and many of his employees. Mr. CEO closed the business and began to look for a day job.
I’ve seen this scenario happen all too often. The thing I find most frustrating is the fact that this all too common tragedy can usually be avoided very easily. Company Presidents and CEOs too often fall into this trap because they shift their focus from running their company and doing what they do well to a sad attempt at being a money raiser or, even more difficult, trying to do investor relations with unhappy shareholders.
It always amazes me how these energetic, intelligent CEOs understand how to market their own product, but fail to realize how important it is to market their stock.
When a company’s stock is going down, it is very difficult to convince credible institutions to finance future expansion. However, when the stock is not falling but rising, many new doors open. “How can I get my stock to perform well?” the CEO might ask. The answer is staring him right in the face. Have your stock marketed just as you market your product. A strong word of caution however; unless you’ve been in the stockbrokerage business for several years, don’t, I repeat don’t, try to do this yourself. As a CEO, you need to focus on keeping your company moving forward. Don’t fall into the trap of trying to be an investment banker or an investor relations specialist. You don’t have time to learn! The learning curve is too long. JUST RUN YOUR COMPANY!
If there is one lesson to be gained from the time you have already invested in this article, it is this. Do not pay promoters to place or sell your stock, because it will come back in your face as surely as there is a day and night. Stock must be bought not sold. When you cram a stock down an investor’s throat, the investor has no loyalty to that stock. At the first sign of trouble, or the next time he sees another “Deal Stock,” your stock is history.
Shareholders who buy your stock because it was, “My Idea” will be loyal through thick and thin. In the end you must pull your company’s stock into the marketplace, never push. Pulling a stock into the market is very simple and usually costs very little or nothing. When I tell you it is simple, it doesn’t mean it’s easy. Pulling a stock into the marketplace takes a lot of time and hard work. There is no easy road — just as there is no easy road to developing a successful company.
There are many investors who like to put a percentage of their portfolio into small cap or Bulletin Board stock. The trick is to find as many of these individuals as possible. Investor Relations firms have databases of these individuals and want to tell these investors about your company.
Now it is time for the development of a glossy folder with a good research report on your company, perhaps a nice reprint of an article from a magazine. If the investor likes what he sees, he will probably buy your stock. Not only will he buy it, he will keep it because your investor relations firm will bombard him continually with positive news about your company. He may even tell his friends at the clubhouse, and they’ll call for a glossy brochure. Will this cost a lot? Well, not really!
Remember, as a CEO you have two checkbooks — one with cash to pay company bills and one with stock to pay for your investor relations.
Mr. CEO, if your stock doubled over the next six months what would it mean to you, your investors, your market cap, moving from BB to Small Cap or even to NASDAQ?
Scott Symons began his financial career in 1977. He holds an M.B.A. as well as degrees in both Economics and Finance.
