Micro-cap, Macro Problem: The MicroCap Image Problem & Tips To Fix It [Guest Post]
Guest Post By: Gregg CastanoWhen most relatively knowledgeable investors think of the term “micro-cap”, the first word that comes to mind is “risk”. These companies, by definition, have low market capitalizations, but also low trading volume, limited assets and often no track record, operations, revenues or fully developed and tested products. These myriad factors can combine into a toxic mix that make these companies extremely vulnerable to stock fraud, most often in the form of “pump & dump” schemes.
Many unsophisticated investors are victimized by pump & dump scams, while others are scared away by the possibility of getting so victimized. The behavior only promises to get worse with the rapid emergence of crypto-currencies and the ICO market. The result is that micro-cap companies have an image problem.
What doesn’t seem to occur to the micro-cap community in general, or to the vast majority of its individual members, is that when you need to fix an image problem, there’s an app for that! It’s called Public Relations.
The concept of PR to companies of this size is most likely foreign and completely off their radars. But given the damage that has been and can be caused by the perception of rampant fraudulence, there is perhaps no industry segment in greater need of good PR than micro-caps.
It doesn’t have to be difficult, expensive or complicated to successfully address this reputational issue. In fact, companies may already have taken many of the steps necessary to solidify the public’s trust but have failed to do the one thing that makes it resonate – publicizing it.
Of course, the primary criterion for a micro-cap to meet in order to establish a reputation for honesty is to be…honest. Since, apparently, not every company is, showing (not telling) the world that you are is a great first step. OK, so how does a micro-cap do that?
Four Ways For MicroCaps To Establish A Reputation For Honesty
1. File Reports with the SEC – First, even if a micro-cap company is not required to file reports with the SEC (those with less than $10 million in assets, or fewer than 2,000 shareholders of record – generally do not have to), they can still voluntarily do so. There is no better way of gaining some “Street” cred than by demonstrating the company’s transparency in this way. Once it’s done, announce it! That’s PR at it’s finest, yet most basic.
2. Communicate Clearly – Next, make sure to clearly communicate to the public exactly what the company’s business is about and what its products and services do. Ambiguity about why the company exists in the first place is a breeding ground for distrust. A good PR professional can help craft and disseminate this message through the appropriate channels.
3. Independent Audits – Step three, make sure the company’s financial statements that are filed with the SEC are independently audited. Objective third-party affirmation of the validity of the numbers is essential to creating confidence among existing and potential investors.
4. Make Management’s History Transparent – Finally, if a company’s leaders have had success in pleasing investors before, make it known. People feel more comfortable associating with proven winners. On the flip side, if those same leaders have had issues in the past with investors or regulators, be transparent and get it out in the open. Better it comes from the horse’s mouth now than be discovered that someone acted like the other end of the horse’s anatomy later.
The doubts that are often associated with micro-caps need not taint nor handicap every company in the segment. With a little proactivity and demonstrated honorable intentions, trust and good will can be generated among the current and potential shareholding public and can be sustained over time with a solid public relations effort. That can only lead to good things, like lower volatility, higher liquidity and positive momentum for the share price.
About Gregg Castano
Gregg Castano spent 32 years with Business Wire in various direct sales, sales management and executive management roles, including Co-COO, culminating in his appointment as president in 2009. While president, Castano was responsible for overseeing the sales and marketing functions, was instrumental in much of the company’s international growth strategy and served on its executive committee, which guides company policy and direction. He performed in this role until his departure in May 2017.
Subsequently, in October of 2017, Castano formed his own independent consulting practice. Castano Communications Consulting, LLC assists Small Cap companies nationwide with their public relations messaging strategies.
Castano Communications Consulting, LLC is based in South Norwalk, CT, where Mr. Castano also resides.
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