2014 11 26 Outgoing Maryland Governor Proposes Gold Standard Rules For Fracking

One of the biggest challenges facing small companies who elect to exit via IPO is obtaining analyst and media coverage for their firms to support desirable stock prices and trading volumes. Experts who cover and report on smaller public companies typically fall into a unique class all by themselves. Many sectors have anointed rock-star stock analysts and market makers who you must get to know and who can be very influential in assisting your firm to meet its value creation objectives. Even if you do not plan to exit via an IPO, seek these people out and make sure they at least know what your firm does. Stay in periodic touch with them.

 

They make a career of being industry insiders and will occasionally be aware of important new trends or moves by larger companies who are seeking to acquire smaller firms. They can also be a good source of referrals if you need assistance accessing another high-level industry executives. Prior to the move toward the decimalization of stock prices in the mid-1990s, there were many more analysts who covered smaller issuers and whose firms received related compensation from the larger bid/ask spread on their shares. The ranks of these analysts have rapidly dwindled in the ensuing years as decimalization effectively dried up compensation. The few analysts that remain often earn their fees by being directly engaged by public stock issuers to report on their companies. Concerns over conflicts of interest in these types of relationships abound and there has been a recent movement, as part of the JOBs Act of 2012, to allow smaller firms to increase their bid/ask spreads (also call “tick size”). Once this occurs, expect many new analysts to enter this field, and look for opportunities to establish new relationships with them because they may become valuable resources for you/your firm.

 

If you choose to go public at some point, having several of these analyst relationships in place will prove to very helpful.