The Challenge of Being An Small Cap Public Company...

Publicly traded Small Cap issuers often struggle with of lack of assets,  limited cash flow, and fall prey to toxic debt.    This combination makes it difficult, if not impossible, for small cap companies to successfully underwrite capital offerings. 

The consequence is low share price and low trading volume. 

This means that no one knows who you are or what you do...investors don't care.

We understand your situation and we can help.  We have a 3 Step Plan to help you with your share price, trading volume and help you raise the capital you are seeking. 


1. You Need A Great Business Story

A Great Business Story is a compelling rationale to invest in your opportunity. Most importantly, the potential for a return on investment.

Do you have a clear, compelling rationale for investors to commit money to your company?

Today, investors literally have 100s of other options to put their money. You are competing for their attention and dollars – so you need to start with a great story and a clear path to an ROI. 

If an investor puts money into your company, they are going to ask you, are you cash flow positive? Are you growing? What new products do you have that are going to change the world?  Do you have a big opportunity – Total Addressable Market?   What problem are you trying to solve?   Do you know the market? Are you hitting your metrics/release dates?   Who is your competition?   What is your business model?  What are your customer acquisition costs?   Are you running operations efficiently?   Who is on your team? How are you going to use the funds?   What is your record of allocating capital?  Are you increasing per share value quarter by quarter / year to year?   When are investors going to get their money back?   Do you have these answers?    These are important to an investor.

These answers will help investors to assess their possibility of an ROI.

From there, they are also going to calculate their downside risk, and determine if your investment offers a margin of safety.

If you have a great story, and trying to raise capital, the next step is that you need to be telling your story to as many investors as possible.

 2. You Need Small Cap Investors

You need Small Cap Serious investors, not penny stock traders. Yes, we have relationships with S1/1A Investors, and I am happy to share that with you. But first, you need to know how they invest...

1. They are looking for Great Companies with Great Stories,
2. They Need Liquidity and a Sensible Share Price in your stock and,
3. They need to make and ROI.

Pretty simple right?

We already talked about a Great Story above so let’s explain Liquidity and Share Price that they need.

Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most liquid asset of all is cash itself. Its why “cash” is the highest rank on a balance sheets. Liquidity allows Investors to get into and investment and get out – minimizing their downside risk. Suppose that a serious investor purchased 10,000 shares of your company at $1 per share one month ago, and then the price rose to $1.30. That means they are sitting on an unrealized profit of 30%. They would like to sell your 10,000 shares and pocket the gains but… If the average daily trading volume of this stock is only 100 shares, it will take years to sell 10,000 at the market price.

Investing in small caps is volatile and that is why your investment needs to have sufficient liquidity. You can only get liquidity from increased trading volume. The higher the trading volume the higher the better the liquidity. This is called the “Liquidity Premium”. The only thing that can help trading volume is more investor eyeballs to maximize success. 

Let's talk about Share Price. Investors need an accurate share price - that means your market cap has a rational valuation. 

Some small cap companies will have a high share price, let’s say $10 per share, with millions of shares and low trading volume (like an average 30-day trading volume of 500) which mathematically calculates to a lofty market cap. But is that an accurate valuation for your company? Will investors pay $10 Million dollars for a company doing $5Million in sales, growing 5 to 15% per year and $500,000 in an industry where the average multiple is 4X to 6X? 

Being public with liquidity can add 20% to 30% on to the share price but no serious investor is going to pay 25X multiple for a 5X multiple company. It’s not rational. They would never make an ROI. Investors will find a better opportunity. 

Day traders or Penny stock traders love a low share price, this is because day traders or penny stock traders don't trade based on the economics or earnings of your company, they trade on the volatility (the up and down movements) of your daily stock price. Day trading happens and there is nothing you can do about it, but as soon as your earnings improve and your share price goes up, the less you will see of the penny stock traders. 

The risk for small cap investors is that the volatility with wide bid-ask spreads can make it difficult to trade profitably. For example, let’s say your stock trades at $0.05 per share, but with the bid set at $0.05 and the ask set at $0.10. To get into the stock, an investor would need to pay the asking price of $0.10 per share, and can only exit the position at $0.05 per share. In short, the investment is down 50% as soon as the investor initiates the trade. The stock would need to double for the investor to break even (not accounting for commissions). This is exactly why many companies, as soon as they qualify, up-list to NASDAQ or NYSE.

If you are transparent, have a great story, great management, allocate capital efficiently, focus on per share value and delivering on what you say you are going to do, eventually, your efforts will be reflected in your share price. Your opportunity could turn their investment into a potential fortune – this is what attracts small cap investors to your company.

 3. You Need Retail Investor Eyeballs to Maximize Success.

This is where we come in. We have assembled a group of S1/1A investors that we can introduce you to, and we have access to millions of retail accredited investor eyeballs that we can send to your offer to maximize success.

You need both S1/1A investors and retail investors. Why? Because you need big check writers and retail investors in your stock to minimize the volatility risk in your share price. Example, If you only have 100 investors and 50 want to exit, that will likely affect your share price regardless of your company earnings performance. But if you have 10,000 investors and 50 want to exit it’s unlikely to affect your share price.

Check a few of our client success stories below.   We cannot guarantee you the same results as these companies but it is not unheard to see a 10X to 20X return on your invested capital. 
If this is something you want to learn more about, call me at 520-488-6704 or schedule a time on my meeting app 30-minute-meeting
CAPITAL RAISE DISCLAIMER:  The amount of capital raised stated above are our personal figures. Please understand our results are not typical, I’m not implying you’ll duplicate them (or do anything for that matter). Mike and I have the benefit of being part of a number of different entrepreneurial projects for over 20 years, and have an established network as a result. I’m using these references for example purposes only. Your results will vary and depend on many factors …including but not limited to your background, experience, and work ethic. All business entails risk as well as massive and consistent effort and action. If you're not willing to accept that, please DO NOT CONTACT US. 
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