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Thursday, January 23, 2003
Keep the Pipeline Full - Generate Leads
by Wayne Jenkins
A typical shareholder base is dynamic. Over the course of a year, a company will lose many of its investors, so it is important to constantly work at attracting new investors. Since most institutions will not consider "penny stocks," smaller companies should focus on the retail investor.
Should a company IR officer be calling individual investors? Of course not. That's the job of a broker. However, the vast majority of brokers are unable or unwilling to introduce their clients to companies that come under the SEC's "penny stock rule." Those few that are willing to consider your company, though, can make a positive impact on your stock price and liquidity.
The best way to access these brokers is to work with an experienced IR consultant with established relationships in the brokerage community. Traditional brokers have lost many of their clients over the past three years and are actively seeking to rebuild their book. You can get their attention by helping them.
There are a number of ways to develop leads. Examples include online programs and direct mail. Your IR consultant should have access to these programs. Once the leads are collected, a list of viable leads can then be provided to the brokers who have agreed to contact them. Since these people have already requested more information on the company, brokers do not have to make "cold calls." They are instead calling to follow up and provide more information. This results in a much higher success rate.
Once the brokers start developing new clients, you should see a positive trend develop, both in the demand for your stock and in the number of new shareholders. It is truly a win-win situation.
Don't Forget Who Brought You to the Dance
While you are trying to attract new investors, do not forget your existing shareholders, especially the top ten or twenty to make up your core group of investors. These people already believe in your company's potential and are your biggest supporters. Make sure you keep them on your side by maintaining a constant line of communication.
Use e-mail to send your shareholders press releases, articles, and other news. Keep them up-to-date on the company's progress through letters from the CEO. Make sure that they have a point-of-contact at the company to call with questions. Also, be sure that you are open to their comments and suggestions. Let them know that you take them seriously and value their opinions.
If they believe in the company and see it making progress, many shareholders will see it as a buying opportunity when the stock it is down. They are you most receptive audience, so do not forget about them.
Remember, small-cap investor relations is all about the story and how you present it. Your job is to craft the right story and then use the basic tools of IR to make sure that investors understand it. If you do it correctly, you can decrease volatility, increase liquidity and build your shareholder base, even in these trying times.
Wayne Jenkins is president of IR Specialists, Inc., a boutique financial communications firm serving smallcap companies.
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