More Than Fundamentals
By
William Cate
[http://home.earthlink.net/~beowulfinvestments/]
[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Sound Fundamentals are vital to the long-term survival of any business. However, the fact that your public company is making a profit doesn't mean that it will trade at a multi-dollar share price. I can list dozens of profitable public companies that trade in Canada and the United States with share prices below US$1.00.
The assumption that investors will discover sound public companies, buy their shares and drive up the public company's share price is an illusion. It doesn't happen. Market professionals know that it doesn't happen. You should assume that nobody will take an interest in your company based solely on the fact that your company has sound fundamentals.
There's a stockbroker adage that holds that "Stock isn't bought; it's sold." It's the company that must find the buyers for its shares. How does the company find the share buyers? The company must have a plan that convinces buyers at the current share price that there will be buyers at a higher share price. Remember that public investors are usually buying their shares with the expectation of a near-term appreciation of the share price that will allow them to sell their shares in your public company at a substantial profit.
Whatever you tell the public should be true. While the SEC ignores about 90% of the public company hype by stock swindlers, you do risk SEC civil and criminal action if you lie to the public. Whatever "forward looking" statements you use should be your company's future reality. It's wiser to promote your company's stock on simple achievable goals than grandiose schemes.
Announcing your "forward looking" statements in news releases is legally essential. However, don't expect the public to buy your shares based upon a news release. It doesn't happen.
Paying with shares to spread the word about your "forward looking" statements with your company's shares is ALWAYS a mistake. The stock promoters may create more buying than that needed to sell their shares. This might result in a higher share price, if your insiders and shareholders don't sell into the promoters' hype. However, the promoters' shares that entered the Market will have to be resold in all the following efforts by your company to spread the word about your company's" forward looking" statements. If you persistently pay promoters shares to hype your stock, eventually there will be too many shares that must be purchased before your company can expect an upward move in its share price. At that point, your public company has failed.
I strongly advise my public company clients to seek ways to encourage their existing shareholders to become long-term investors in the company. If your existing shareholders don't sell their stock, it costs your company far less to spread the word about your "forward looking" statements with the expectation that the investor relation's effort will result in a sustainable strong share price. The primary group who should be long-term investors are your company's insiders, officers and directors. Your employees shouldn't have shares they can quickly sell into the Market.
Whatever "forward looking" statements you use to seek buying for your company's stock keep the message simple and credible. Try to focus upon statements that should result in greater demand for your shares within the next few months.
There is an infrastructure of firms that can help you spread the word about your "forward looking" statements. Be certain that you are dealing with reputable professionals and not with the stock swindlers that are always aggressively courting you to use them to hype your shares. Be aware that investor relations' cost are never ending and a serious drain on your company's profits. If your public company hasn't a sound reason to pay to create a strong and sustainable share price, your company shouldn't be public.
To contact the author visit:
[http://home.earthlink.net/~beowulfinvestments/]
[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
About the Author
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]