Don't Let A Volatile Market Control Your Investor Outreach – The Importance Of Staying Visible 100% Of The Time

Since the 1990s, active investments have accounted for less and less of the daily trading volume. Asset allocation largely replaced individual stock selection because investors opted for baskets of stocks. However, 2022 reflected a subtle shift in this narrative. 2022 was a difficult year for the global economy and as a result, entire sectors took hard hits. The poor market conditions placed a renewed importance on individual stock selection.

In October 2022, Bank of America BAC reported that investors piled into single stocks at a historic pace during the month. Now more than ever it might be important for companies to provide investor education. Corporations that wait for better markets to provide consistent investor engagement and education miss out on lucrative opportunities.

Approximately 19% of companies listed on the Nasdaq have no coverage at all. While some of these companies are larger enterprises, the majority are small-cap companies. Coverage for many small caps is limited to quarterly reporting which minimizes the exposure that a company could be getting. That’s why it can be useful to outsource investor engagement and ensure your company is being talked about frequently. 

Investors May Pay Higher Multiples For Transparency 

Every company that is publicly traded should have a strategy for education, amplification of its message, and investor targeting. Too often this is all but obsolete from the sell side for small caps. When companies do not educate investors and amplify their message, they are sometimes at risk of losing money and influence. 

Broker-dealers typically only focus on the top 100-150 paying institutional accounts but RIAs, retail investors, family offices, and middle market institutions have large pools of investment dollars that focus on a more diverse set of stocks. With the proper engagement and investor targeting, companies could be well-positioned to reap the benefits of visibility within these spaces. 

Investors often create target lists; when companies create due diligence packages and keep pushing out educational material for investors, they are more likely to show up on target lists. Investors are often attracted to transparent companies and are reportedly willing to pay higher multiples for transparency. 

Water Tower Research is an independent firm that focuses on education, amplification of messages, and investor targeting. The company reports an extensive expertise at strategic investor relations and sell-side research. Water Tower Research uses a variety of distribution channels from institutional and traditional platforms like Bloomberg to retail-specific platforms like StockTwits. The company is also active on social channels and its platform is open access and free to all investors. 

In many instances, Water Tower Research is an extension of a company’s investor relations team. Their content is regularly accessed by more than 1,500 institutional investment firms and more than 7,000 firms that include RIAs, family offices, and private wealth managers. In 2022, Water Tower Research’s content was accessed over 10,000 times by unique users. 

The decline in amplification and decreased awareness are some of the biggest challenges for small-cap investor engagement. During these more volatile markets, it can be crucial for companies to maintain transparency, push out content, and educate potential investors. Proactive communication is often invaluable and allows investors to push through transactions when markets normalize. 

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

Featured Photo by Oren Elbaz on Unsplash