If you have a public company, or are anticipating taking your company public, the subject of stock support, often ignored, should be a critical part of your corporate planning.
It is the foundation for the success of your stock values. This is how you will ensure that your share price is at its highest possible level at the time a buyout or merger offer is made for your company.
Growing Your Business
Private companies go public to grow their business. Being a public company makes it easier to access money, the lifeblood of business. You convert your equity to cash. It's easier for a public company to borrow money. You can buy corporate assets with stock. Eventually, you will sell your public company based upon its share price and not its balance sheet. These benefits depend upon your ability to maintain a strong share price.
Better marketing, not better mousetraps, creates strong share prices. To ensure that the stock is both strong and stable, your corporate vision must become the vision of your shareholders. You must effectively tell your story to the financial community.
Better marketing means educating the investment community about your company and your industry. It means developing personal relationships with your shareholders and market makers. It means being honest about your company and leveling with your supporters. It means expanding the demand for your stock beyond the limits of North America.
There are several ethical rules of corporate behaviour you must follow:
* Understate, never overstate your positives. (Enron?)
* Communicate in good times and bad. (It's vital to have a vice president of investor relations, whose sole job is to communicate with your shareholders and the financial community. )
* Investor relations programs should rely on filings over news releases.
* Investor relations programs should aim to diversify the shareholder base.
You must develop a coherent business strategy stating clear performance, profitability, and expansion goals. The strategy must then be translated into an appropriate investment message. It must target investors with similar goals and economic objectives.
* A company that doesn't communicate effectively will fail.
* A company should list its investor relations goals.
* A company should target its investor audience.
* An outside investor relations program should list strategies and expected results.
* You need a story to tell.
* People do business with companies they trust. If you want the financial community to believe you, level with them.
* Know your message.
* Doing what's right is good business.
Maintaining A Strong Share Price
You need a strong share price to buy assets without diluting your issued stock to the point where it makes it impossible to keep a strong share price.
If your share price bounces down, you create selling barriers which, when you attempt to move it back up, motivate present shareholders to dump their stock into your efforts.
Unstable share prices attract short sellers. Unstable share prices attract regulators.
Strong share prices are essential to get your company listed on stock exchanges in this country and elsewhere. Strong share prices make bankers happy when they consider lending your company money.
The list is endless. There is no advantage to having a penny stock. There are loads of disadvantages.
Supporting Your Share Price
You must support your stock price whether you use our private placement program, do an initial public offering or any other public offering. My associate’s company considers this concept so critical, for instance, that his investors provide and fund a powerful five-year external stock support program to bolster and extend the value of clients’ insider programs. Combined, the two programs can create a strong marketing effort for a stock in the United States, the United Kingdom and Europe. They will also ensure a high value at merger/acquisition time.
Remember that selling the concept of owning your stock is just as critical as selling the concept of using your product or service. The customer list may be different, but both represent profit potential for you and your company and a Golden Parachute four or five years in your future.
Mr. Barnes is President & General Manager of Capital Funds Group Ltd. , a Canadian based world wide consulting firm specializing in Putting Companies and Money Together. They also work with non-US companies to take them public rapidly and inexpensively, then getting them funded. Visit our Web Site Email Him