OTC Markets Group, Inc. (OTCQX: OTCM) recently published its coveted Small-Cap CEO/CFO Survey results in July 2017. This wealth of information is obtained from surveying 117 total respondents, which are CEO’s and CFO’s of OTCQX and OTCQB companies with market caps under $2 billion. In 2017’s survey results, there were several eye-opening key findings:
- The top 3 capital market challenges that small-cap managers are facing
- Lack of analyst coverage/research reports
- Lack of focus on investor relations
Top 3 Capital Market Challenges
According to the Small-Cap CEO/CFO Survey results, the top three capital market challenges that small-caps currently face are ability to increase liquidity in their stock, increase the share price, and raising capital.
These are common setbacks that are constantly killing companies’ growth engine and momentum. It all essentially boils down to lack of funding resources. Small-cap companies go public on OTC Markets with the intent of being able to raise money through liquid trading in their stock. Why else would a company want to go public? However, without proper investor awareness, all accomplishments could fall on deaf ears.
Increasing liquidity and share price can be a challenging feat, but with a proper IR/awareness strategy in place, the investor community becomes much more engaged and interested in learning more about your company.
Lack of Analyst Coverage/Research Reports
The survey also highlighted a shocking lack of analyst coverage within the OTC Markets community. According to the survey results, over 68% of respondents said they had no analyst coverage. Only 26.8% of respondents said they had at least one analyst covering their stock, with 5.2% saying they did not know whether they had coverage.
While obtaining analyst coverage in the early days of a company’s growth process is difficult, there certainly is an abundant lack of coverage. This shows that whoever is leading the investor relations department of the company is either not doing their job or does not understand how to go through the process of attracting analyst coverage.
Lack of Focus on Investor Relations
One of the most shocking takeaways from the survey was the considerable challenge that small-cap companies face when it comes to investor relations. According to the survey results, 73.30% of respondents say the CEO or CFO leads the investor relation duties, yet they admit that actually only 11% of their time is spent on investor outreach.
The problem here is that managers are taking on too many tasks at their company. Managers should have the majority of their focus on growing the business and providing value for shareholders.
Investor relations is one such task that needs a lot of time and attention, but it is extremely important. This is why either an external firm (such as Spotlight Growth) or internal director is needed in order to give investor outreach to full attention that is needed and deserved. A strong investor relations program builds investor loyalty and confidence. Investors deserve to know what is happening and the latest updates that are impacting their money.
Overall, the 2017 Small-Cap CEO/CFO Survey shined a light on several major issues and topics that currently effect small-cap and micro-cap companies. Increasing liquidity, share price, analyst coverage, and investor relations exposure are all major concerns shared by respondents. Managers are urged to reach out to external investor relations firms to bridge these common gaps and help keep operations smooth.
Spotlight Growth is one such company that provides full-service investor relations services, which can include investor awareness programs. Please feel free to contact us to learn more about our services and what we can do for your company.
For the full results of the 2017 Small-Cap CEO/CFO Survey, please click HERE.