As The Slopes Begin To Thaw, Jay Peak’s Assets Are Frozen.

As The Slopes Begin To Thaw, Jay Peak's Assets Are Frozen.
Jay Peak Ski Resort president Bill Stenger

Last Thursday, the Securities & Exchange Commission announced “fraud charges and an asset freeze against a Vermont-based ski resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.

That “Vermont-based ski resort” is Jay Peak, Vermont’s northernmost ski resort. The mountain is perhaps as well known for its use of the EB-5 program as it is for great terrain and snow conditions.

For those of you who don’t know what the EB-5 program is – the program is a path to U.S. citizenship through investment. The program requires applicants to “invest $1,000,000, or at least $500,000 in a targeted employment area (high unemployment or rural area)

Jay Peak has used the EB-5 program to raise “over $350 million from foreign investors to expand its facilities and create local jobs“. While some of the funds were indeed used to expand the Jay Peak facilities and create jobs, according to the SEC, $200 million was misappropriated including “$50 million of investor funds intended for an expansion of the property [used for] personal expenses“.

The SEC charges that the owners of Jay Peak, Ariel Quiros and William Stenger, inappropriately used funds for things like; “buying Jay Peak from its previous Canadian owners, and the funding of credit lines, income tax payments, purchases of real estate, and the repayment of sizable margin loans“.

Quiros lives in Miami according to investigators and shortly after the SEC announcement a “federal judge in Miami ordered the assets of Jay Peak and related businesses frozen“.

As the Vermont ski season comes to an end and the mountains begin to thaw, Jay Peak (assets) will remain frozen. At least the SEC waited for the end of ski season!

 


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR GENERAL INFORMATION PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.
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Damn Spotify, Back At It Again With The Convertible Debt!

Spotify just raised $1 billion with convertible debt after announcing  $500MM in convertible debt a few months ago. In reaction, TechCrunch posted an article titled “Spotify raises $1 billion in debt with devilish terms to fight Apple Music“. While the writers at TechCrunch may think the terms of the convertible debt  are “devilish”, this financing seems more angelic to me.

Key Terms Are As Follows:

–  $1 billion in convertible debt from “TPG, Dragoneer, and clients of Goldman Sachs

– 20% discount to IPO price

If no IPO within the next year, discount goes up 2.5% every extra six months

– 5% annual interest on the debt

Plus 1% more every six months up to a total of 10%

– Note holders subject to 90-day lockup after the IPO (90 days less than 180-day lockup period for Spotify’s employees and other investors)

While this deal has the potential to hurt early investors (including employees and other shareholders), it is only a problem if Spotify (and thus the IPO) doesn’t perform well. In my opinion, that is the only real negative of this deal.

As I’ve discussed in previous posts, its hard out there for unicorns (especially those, like Pebble, competing with well-funded tech giants). So why is this a good deal?

Why This Is A Good Deal For Spotify:

Comparatively, Terms Are Decent: While the terms may appear rich to some, they are not so bad considering the ratchets, liquidation preferences, and other anti-dilution type covenants rampant among late stage unicorn financings. Additionally, more traditional financing consist of locked in valuations providing substantial upside in addition to downside protections.

VCs Are Nervous: Traditional VCs have become cautious of unicorns as exit options are limited (slow IPO market), firms write down the value of their unicorn holdings, and unicorns begin to fail or suffer down rounds.

Competition Is Fierce: Competition has drastically increased and, like Pepple, Spotify is now competing with Apple and other well-funded players.

Valuation Determined In Future: In a difficult environment for unicorn financing, Spotify can maintain its valuation while raising significant capital all priced in the future when the company and or markets are (hopefully) in better condition.

 

Bottom Line:

If Spotify plans on performing well, this deal isn’t “devilish”! But, if Spotify plans on struggling to grow and compete then this deal will be bad for Spotify but, at that point, they will have bigger problems than convertible debt.

I should also point out that, “while there were reports in January they were looking to raise $500 million via convertible debt it’s not clear whether that amount was raised, or the $1 billion we are seeing today is the result of those attempts“. At the time, the terms on the $500MM (leaked by a Swedish newspaper) outlined a 17.5% discount and 4.5% annual interest compared to 20% and 5% respectively for this $1 billion round.  

What do you think? Is this a good deal for Spotify? Does Spotify have any other options? Will Spotify win the music streaming wars?


 

About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR GENERAL INFORMATION PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

Kickstarter King Laying Off 25% of Staff a Reg A+ Candidate?

Kickstarter King Laying Off 25% of Staff a Reg A+ Candidate?

Smartwatch pioneer Pebble recently announced they were laying off 25% of their staff. Pebble CEO Eric Migicovsky told Tech Insider– “We’ve definitely been careful this year as we plan our products,” Migicovsky said. “We got this money, but money [among VCs in Silicon Valley] is pretty tight these days.”

Perhaps you have heard of Pebble as they were “one of the first companies to launch a modern smartwatch”. Unfortunately, first doesn’t mean much in Silicon Valley, especially when your competitors are tech giants like Apple and Samsung.

Pebble was also one of the most successful KickStarters ever. Not only did Pebble’s 2012 Kickstarter raise $10.3 million but when Pebble went back to Kickstarter, in 2015 with an updated product, they raised $6.2 million in less than 4 hours. In total, Pebble raised over $30 million with two Kickstarter campaigns.

Since its Kickstarter success, Pebble decided to look for a more traditional VC funding. Unfortunately for them, it has been a bumpy road. Last May, TechCrunch reported that the company turned “to a Silicon Valley bank for a $5 million loan and $5 million line of credit” versus more traditional equity funding. As of writing this “Migicovsky also confirmed that his company had raised $28 million in debt and venture financing over the past eight months”.  Even with the Kickstarter success and VC funding, Pebble is still forced to layoff staff.

The slow IPO market, fears of a unicorn bubble, and fierce competition in the smartwatch space have caused VCs to be cautious. Perhaps this will be a blessing in disguise for Pebble, the kings of crowd funding.

With Reg A+ transforming the crowd funding landscapes and the recent success of Elio Motors’ Reg A+, this may be perfect timing for Pebble to use Reg A+ to alleviate their funding problems. While I haven’t been able to find anything official regarding a Pebble Reg A, this may be the natural solution for the kings of crowd funding and other tech companies struggling to raise capital in Silicon Valley.

 


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR GENERAL INFORMATION PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

5 Reasons Why M&A Is The Best Way To Grow A Micro-Cap Public Company.

5 Reasons Why M&A Is The Best Way To Grow A Micro-Cap Public Company.

Growing a micro-cap public company can be very difficult. Many approach growing a micro-cap public company the same way they would a start-up. While organic business growth is important, it is usually too slow and expensive for a micro-cap public company.

In my experience, the best way to grow a micro-cap public company is through acquisitions. Micro-caps are basically designed for growth through M&A. In a previous post, I compared a micro-cap public company to a Ferrari and M&A to the open highway.

Some of you reading this might be thinking; “how could anyone compare a micro-cap to some of the finest luxury sports cars in the world?” If you are one of those readers, your question is probably a result of watching directionless drivers attempt to drive their Ferraris through the mud.  By driving through the mud I mean, trying to grow a micro-cap public company like a private business.

There are numerous examples of micro-caps succeeding by growing through acquisitions (if you don’t want to take my word for it, check out the companies that “uplisted” from the OTC to a senior exchange last year). In this post I will explain why, in my opinion, M&A Is The Best Way To Grow A Micro-Cap Public Company.

M&A Is The Best Way To Grow A Micro-Cap Public Company for 5 reasons; transparency, equity currency, accretion, capital markets, and net operating losses.

Transparency – Whether SEC reporting or meeting an alternative reporting standard, public companies are required to maintain a relatively high level of transparency. From PCAOB audited financials to timely disclosure requirements, public companies (big and small) are held to a higher standard than private companies. While complying with these requirements can be burdensome (as many of you know), compliance also provides sellers and investors with a certain level of comfort. Sellers (receiving notes and/or stock as part of the purchase price), equity investors, and lenders can be confident in publicly available information regarding the acquirer and know that the acquirer will continue to meet important transparency standards in the future. Transparency encourages sellers to require less cash up front and lenders/investors to provide greater funding under better terms.

Equity Currency – Because public companies (should) have stock that is liquid with a third party (market) valuation, stock can be used to pay for part or all of an acquisition.  In theory, stock in a public company can easily be sold for cash affording sellers the opportunity to take stock for future upside while maintaining the option to liquidate at any time. In fact, nearly 20% of M&A transactions in 2015 were all stock transactions. It’s much more difficult for private companies (especially smaller private companies) to use stock for acquisitions because sellers will need to wait for a liquidity event (IPO or acquisition) to turn their stock into cash and the valuation of a private acquirer’s stock is much more abstract.

Accretion – Micro-cap public companies, with exciting growth stories, often have stronger valuations than comparable private companies. Stronger multiples mean companies can acquire private companies at lower valuation multiples and receive a higher valuation on the newly acquired business in the public market (a/k/a: accretive acquisition).

Capital Markets – Access to the capital markets (and the liquidity and valuations they provide) let public companies raise more equity capital faster, and at higher valuations, than comparable private companies. Combining equity capital with stock consideration, seller notes, and traditional acquisition financing; micro-cap acquirers can complete larger acquisitions faster and for a smaller percentage of equity.

Net Operating Loss – While a net operating loss (“NOL“) may be considered a bad thing because they are a result of a business losing money, in many cases NOL’s can be used to offset taxes on future profits (including the profits of acquired businesses). Micro-caps with long operating histories, high legal/accounting/compliance expenses, and little revenue can often offset the tax bills of profitable targets. By levering  past losses a micro-cap acquirer can increase the bottom line of a profitable target once acquired thus increasing its own bottom line.

Those are the  5 reasons why (I believe) M&A is the best way to grow a micro-cap public company. Next time you see a someone lost in the woods with their micro-cap Ferrari, do them a favor and direct them to the M&A highway.

Do you think M&A is the best way to grow a micro-cap public company? Do you have a better strategy? Please comment and share!


 

About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR ENTERTAINMENT PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

Pros and Cons of Equity Lines for Micro-Caps.

Pros and Cons of Equity Lines for Micro-Caps.

If you run an SEC reporting micro-cap public company, you have probably been offered financing through what is commonly referred to as an equity line (also referred to as equity purchase agreement or credit line). Equity lines usually require an issuer to register stock (through an S-1) to be sold from time to time to a private investor via “put notices”.

Often, micro-cap management teams get into financing situations without fully understanding the pros and cons of specific financing structures. I will  attempt to outline some of the major pros and cons of equity lines for micro-cap public companies below.

Benefits of Equity Lines for Micro-Cap Issuers: Low cost & high control

Relatively Inexpensive Capital – Compared to the equity funding options available to most micro-cap issuers (especially for general working/growth capital), equity lines have a relatively low cost of capital. Most lines have discounts to market of 25-5% on the date of each put. Often these discounts are accompanied by upfront fees and small ongoing fees. Among other things,  registration greatly decreases the investors risk and thus decrease the cost of capital to the issuer.

Management has Control – While naturally all equity financing have some dilutive properties, equity lines allow management teams to control the dilution.Because the issuer elects when to draw down the line, they can draw down when the market price is high and liquidity is abundant. Low cost coupled with high control make equity lines a great financing option for issuers with strong valuations and liquidity or issuers that plan on building strong valuations and liquidity in the near future.

 

Negatives of Equity Lines for Micro-Cap Issuers: SEC registration, funding based on market & upfront costs

SEC Registration – Equity lines require the filing of an S-1 registration. Any funding is dependent on the SEC reviewing that filing and declaring it “effective”. Those who have gone through the SEC registration process before know it can be a long, expensive, and exposing process.

Market-Based – Funding from equity lines are completely contingent on liquidity and market price. While the issuer can control when to submit put notices, management can’t or won’t submit a put notice when the market price is low or there is little liquidity. In most cases, because the stock is registered, the private investor receiving the stock via the equity line will be selling the stock immediately.  If an issuer submits a put notice when there is no liquidity, all they are doing is dumping stock on their own market. Without liquidity, the price will fall too low for another put. While management probably has their own limit for a minimum put price, equity line documents also set a minimum price. Not only can management effectively block the use of the equity line with excessive puts but, if the price falls for other reasons the equity line still becomes unusable.

Upfront Expense – Private investors providing capital via equity lines usually charge high upfront fees. Fees can range from $10s of thousands in cash to $100s of thousand in promissory and/or convertible notes (or both). These fees usually don’t cover/include all of the expenses of preparing the S-1 filing, amending the filing, and having attorneys communicate with the SEC.

In summary, if you have liquidity, a strong valuation, a clean operation, time and excess capital – an equity line is a perfect funding option for you! Equity lines are a great way for micro-caps to raise equity capital as long as they understand the requirements.

For more on equity lines (and their big brother, the ATM facility), check out this cool white paper from Practical Law Company HERE.

Did I miss any of the pros and cons of equity lines for micro-caps? Please feel free to comment and share.


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR ENTERTAINMENT PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

How to Raise Capital with a Great Idea.

How to Raise Capital with a Great Idea.

You have a great idea! Next step is to turn your idea into a business. A business that makes money. A lot of money! Sounds great but, as most of you probably know, it’s not as easy as it sounds (in fact its much much much harder).

There are a number of paths to business success and sometimes those paths include a micro-cap public company. Those of you on the micro-cap path probably followed it thinking it would lead to easy money. Depending on how far down the road you’ve gotten, you may have realized raising capital as a micro-cap is anything but easy. So now that you are here, how do you make the best of it?

In 99% of cases, an idea alone isn’t going to be enough to get you the capital you need (under half decent terms) to grow your business. If you still think someone is going to give you a big check at a strong valuation for you to attempt to execute on your idea,  you haven’t been at this long enough! If you are willing to accept that a $10 million check at $1 billion valuation for your idea isn’t coming, I have a solution for you.

The solution – acquire a profitable business! While it may be hard to find funding for your idea, it is easier to find capital to acquire a profitable business with assets, employees, customers, revenues, etc. It’s even easier if your great idea is synergistic with the business you are acquiring (and seller financing can play a large role). Once acquired, you can leverage an acquired business’ assets to implement your great idea while leveraging its financial strength to raise growth capital.

While this strategy works well for private companies, it works even better for micro-cap public companies. Micro-cap public companies are uniquely positioned to grow through acquisitions (see my previous post: “Micro-Cap Acquisition Funding – 5 Ways for MicroCaps to Fund Acquisitions.“). Further, if your idea is as good as you think it is, seller financing could help you close a large acquisition with limited outside financing (see my previous post: “Do your Targets Believe? The Key to Micro-Cap Acquisition Financing.“).

As an added bonus to the micro-cap CEOs concerned about their share price and liquidity, acquisitions are usually very good for a micro-cap’s stock. For micro-cap IR teams trying to avoid “fluff”, an acquisition is a big tangible event. A good acquisition can take a company’s market value from a fragile abstract concept balancing on an idea to a value based on tangible financial metrics (plus the added market value from the great idea).


 

About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR ENTERTAINMENT PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

Unicorn Ratchets – A Valuation Fairy Tale.

Unicorn Ratchets - A Valuation Fairy Tale.

Going from start-up to $1 billion+ valuation, in a short period of time, is something all entrepreneurs, employees, investors, and other stakeholders dream about. This fascination with “unicorn status” has led unicorns and their investors to stretch the boundaries of conceivable valuations. In 2009 there were just 4 unicorns, as of writing this post there are 152.

As the number of unicorns grow, valuations increase into the $10 billion+ range, and larger more traditional investors get involved (mutual funds, hedge funds, sovereign wealth or corporate investors vs. VCs), unicorn financing structures have gotten more complicated. The recent IPO of tech unicorn-Square, Inc. got many to notice what is known in the investment community as a ratchet.

Investopedia defines ratchets as;

An anti-dilution provision that, for any shares of common stock sold by a company after the issuing of an option (or convertible security), applies the lowest sale price as being the adjusted option price or conversion ratio for existing shareholders.

Law firm Fenwick & West LLP noted that “Approximately 30% of unicorn investors had significant protection against a down round IPO“. Examples of unicorns with ratchets in their funding transactions include Lyft, Chegg, Box Inc, and more. There are many different types of ‘ratchets’ but the general idea is that if a company raises capital, gets acquired, or goes public at a lower valuation than a previous “ratchet round”, investors get their earlier investment valued at the new round’s lower valuation (or a discount to that new lower valuation).

Ratchets are essentially steroids for unicorn valuations. TechCrunch points out that;

It’s increasingly common in mega rounds to build in protections such as IPO ratchets. It’s a sort of win/win for companies and investors. Companies get their shiny unicorn valuation (which helps with recruiting, in addition to being the vanity metric du jour), and investors get some downside protections

So what does this all mean? It means that many unicorn valuations aren’t “real” rather, they are fantasy portrayed by investors and founders. As with most fairy tales, those telling the story (investors, founders) know its not real but those listening to the story (retail investors, employees, media, etc.) may be enchanted by the tale. Unfortunately, when things go wrong, employees and others in the dark on unicorn ratchets are left “holding the bag” (see my previous post, “When Unicorns Die, Employees go to Hell.“) . Perhaps we call these companies unicorns because their valuations are as fictional as unicorns in the traditional sense.

 


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: This blog and all of its contents (the “Site”) are for entertainment purposes only. The views expressed are solely those of the author. This Site should not be construed as an offer to buy or sell any securities or as an offer to transact. Nothing on this Site should be considered financial, legal, or tax advice.

27% Less OTC Graduates In 2015 Than 2014.

27% Less OTC Graduates In 2015 Than 2014.
In their January 2016 newsletter, OTC Markets Group announced that they continue to be the “Global Leader in Exchange Graduates”. OTC Markets Group also highlighted that “Over the past five years, nearly 400 companies have used OTC Markets Group as a springboard to a national securities exchange listing” (bold emphasis added).
With 60 graduates, the OTC had 51 more graduates than the junior exchange with the second highest number of graduates (the TSX with 9 total graduates). While its clear that the OTC Markets produces more graduates than any other exchange, 2015’s 60 graduates are 23 (or about 27%) less than the 83 OTC graduates of 2014. It is also less than the average of approx. 80 graduates/year over the last 5 years (400÷5).
In their newsletter, the OTC Markets Group did not elaborate on the decrease in graduates. This decrease got me thinking; why did less OTC companies uplist in 2015?
I came up with four possible answers:
Regular Fluctuation: Based on the “nearly 400 companies [have graduated in the last 5 years]” stat, the average graduation rate was approx 80/year. While a 25% fluctuation from the average is significant, with so few graduates annually, just a handful of companies can have a big impact.
Issuers Are Staying On The OTC: Over the last couple of years the OTC Markets has made great strides, improving the standards of both their QB and QX tiers. Perhaps this increased quality of the QB and QX has made more issuer comfortable staying on the OTC for longer.
Less IPOs/Reverse Mergers: 2015 was one of the slowest years for IPOs and reverse mergers. In 2015, IPOs were down 34% from 2014 and reverse mergers were down 42%. Less new issuer joining the OTC may mean less issuers trying to uplist.
Seasoning Rules: Issuers who have gone public via reverse merger must comply with “seasoning rules” that require certain issuers to trade on the OTC (or similar exchange) for a minimum of one year before joining a senior exchange. Whiles these rules aren’t new, they may discourage companies from quickly jumping from the OTC to a senior exchange.
Those are my guesses as to why there were nearly 30% less up-lists in 2015 than 2014. Perhaps I am off the mark. I had a hard time finding up-list data for 2013, 2012, or 2011. It would be interesting to look at some more data to see what insights it might provide… maybe another day!

 


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR ENTERTAINMENT PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

Unicorn Shareholders Ready To Leave Fantasy Land.

Unicorn Shareholders Ready To Leave Fantasy Land.

In a previous post, “For Unicorns, It’s a Long Road Out of Silicon Valley.“, I discussed the issues with unicorn exits. Now, it seems like the dreamers of Silicon Valley are beginning to wake up.

A recent article on TechCrunch titled “Secondary Shops Flooded With Unicorn Sellers“, shows concern is growing in the heart of unicorn land. VC’s, employees, and even founders are all looking to exit their unicorn holdings. One of the article’s sources added “The smartest inside money is trying to get out for the first time in six years”.

Struggling IPO markets (January saw not one IPO and recent unicorn IPOs have had poor results) , ratcheted valuations, unicorn failures, and large firms devaluing their unicorn holdings , have those holding unicorn shares worried about becoming “bag holders”.

So far, secondary trades continue to go through. While the “premium” unicorns are still receiving strong valuations, other unicorn sellers are having to take lower prices. Time will tell if this is the extinction of unicorns or just a market correction.


 

About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


NOTE: THIS BLOG AND ALL OF ITS CONTENTS (THE “SITE”) ARE FOR ENTERTAINMENT PURPOSES ONLY. THE VIEWS EXPRESSED ARE SOLELY THOSE OF THE AUTHOR. THIS SITE SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY SECURITIES OR AS AN OFFER TO TRANSACT. NOTHING ON THIS SITE SHOULD BE CONSIDERED FINANCIAL, LEGAL, OR TAX ADVICE.

Micro-Cap IR Basics.

Micro-Cap IR Basics.

I often encounter micro-cap CEOs who want to increase liquidity and the valuation of their stock. These CEOs tend to think a micro-cap IR (investor relations) firm is their solution. While micro-cap IR firms can be very helpful with crafting and disseminating a micro-cap company’s message, there is no magic overnight solution to liquidity and market valuation.

First off, I am not an IR professional but I have had a lot of experience with micro-cap IR from an investor and consult prospective. In my opinion, the two most important pieces to micro-cap IR success are business progress and communication. If your business is progressing and you do a good job communicating your story (and progress) to shareholders, not only will you gain traction on your own but, you will get much more value from any micro-cap IR firm you choose to engage.

Business Progress

The first piece, business progress, is something the management team of any public company should have a strong handle on. After all, you are in business to build a business! If you worry more about your business growing and less about the market, you are on the right track. For the purpose of this post, I will offer one piece of advice – remember that setbacks are only stepping stones on the path to success. H. Stanley Judd (a little-known author with some fantastic quotes) said;

“Don’t be afraid to fail. Don’t waste energy trying to cover up failure. Learn from your failures and go on to the next challenge. It’s ok to fail. If you’re not failing, you’re not growing.” – H. Stanley Judd

Communication

To continue off of Mr. Judd’s quote, you need to HONESTLY communicate with the market regularly (good or bad)! Because micro-caps have little analyst coverage and/or similar information easily available to the public,  it’s very important to tell the market what you are trying to do and how you plan to do it. According to the Harvard Business Review “Wall Street Rewards CEOs Who Talk About Their Strategies“.

Below I highlight two general philosophies that I believe are key to the success of any micro-cap IR strategy; (1) treat all shareholders the way you would want to be treated and (2) present yourself professionally. I’ve also included links to a few free webinars that should set you on the path to micro-cap IR success.

Treat All Shareholders the Way You Would Want to Be Treated – The age old adage, “treat others the way you want to be treated”, definitely applies to micro-cap IR.  Imagine if you were a shareholder in a public company (who bought stock in the open market), or better yet, a large shareholder who invested thousands, hundreds of thousands, or millions of dollars in a company’s public stock (the exact type of investor many mico-cap CEOs want to attract). Wouldn’t you want to be updated regularly on the business, good or bad? Well, if you want to attract investors (especially large and loyal investors) you need to treat all shareholders the way you would want to be treated! Update them, respond to their queries, consider their position when making decisions, make them feel like they are part of the team, etc.

As an added bonus, you may find that treating shareholders well will convert those shareholders into your biggest supporters. If you do it right, not only will they invest in your stock but they will also work to help you succeed! You will find that, if you treat shareholders well, they will become your own grass roots IR and sales “militia”. Best part is, this grass roots team will be better than free because they will be buying your stock while they help the business in other ways!

Present Yourself Professionally – Do you have a professional website, updated social media accounts, a strong physical presence, easy to find contact info (that works!), and an IR website? Are you responsive to inquiries, do you proof read/format your press releases properly, do you make updated investor information (presentations, news, filings, etc.) easy to find, do you regularly update investors through conference calls or press releases, does your story flow from press release to press release? If you want the market to believe your company is the “real deal”, and thus buy your stock, the answer to all of the above questions should be a big YES!

Technical Tips – While the above tips are more general philosophy, there is also a lot of technical work that goes into IR communication. Below are two links to free webinars that will guide you through building a strong micro-cap IR program (before you start paying for outside help).

Small-Cap Webinar Series from Vintage (a division of PR Newswire): “With first-hand “how-to” advice expertly structured for small and micro-cap companies, this six-part series will walk listeners through the steps needed to transparently and effectively communicate with current shareholders and prospective investors.”

Check out the entire free webinar series from Vintage HERE.

IR Best Practices for Entrepreneurial & Development Stage Companies from OTC Markets: “Please join John Heilshorn, Partner at the investor relations firm LHA, and Bob Power, Vice President of Corporate Services at OTC Markets Group, for a webinar on how to develop a successful investor relations program for small-cap, growth companies. Listen and share your questions as we discuss best practices to engage shareholders.”

Check out the free webinar from OTC Markets HERE.

There you have it. In my opinion, those are the micro-cap IR basics. Build a real business and communicate with investors and you will have a foundation that any micro-cap IR firm can build off to exponentially increase your liquidity and valuation (if you still even need outside help when your done).


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

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