CIRI 2018: Top tips for small-cap IR
Twenty years ago, the Canadian small-cap market was booming, buoyed by the pre-2000 tech bubble. But the 2000 crash and the 2008 financial crisis have caused investors to focus on mid and large caps more often, creating a challenging landscape for small-cap marketing during the last decade.
Panelists at the small-cap session at the CIRI annual conference provided some unique tips for small caps today.
Approach investors directly
Bruce Krugel of Laurentian Bank Securities praised the improvements in IR services available to identify investors, and the portfolio managers at those service providers – singling out Bloomberg and Cap IQ for recognition. But he cautioned that just because IR teams can now more easily identify potential investors, it doesn’t mean they can avoid doing their research into what the investor’s perspective and thesis is.
‘You have to know your client,’ Krugel said. ‘If you call small-cap managers with something they’re not interested in, they will give you a pass the first time. But second time they will get very blunt and annoyed. They’re busy people and they want only relevant outreach.’
Look for investors in new places
Naomi Nemeth, vice president of communications and investor relations at Coro Mining Group, relayed an experience she had at a previous job. She was looking for new investors to market to and discovered that shipping companies in Norway have their own investment divisions.
‘I didn’t know what their criteria were because they don’t publish them, but I found out that they were managing all kinds of investments,’ she said. ‘I thought maybe some of them might like resources, so I put together a story and started contacting them. Almost all of them called back.’
After her initial discovery, she picked up a registry of shipping companies and identified the ones she thought would be big enough to have their own investment divisions. In subsequent conversations, she found that steel companies in Japan have similar investment funds they manage themselves. ‘I found that they would see companies directly, so I set about contacting them with our story. It meant a lot of sitting on the phone, but it was worth it,’ she said.
Closer to home, she also found a registry of family offices in Canada and set about calling them, finding out what they were interested in and building a compelling story for them. ‘If you’ve got thick skin and you don’t mind grunt work, try making the calls,’ she said.
There’s strength in numbers
Nemeth also said that at a previous job she helped to arrange a roundtable of non-competitive small-cap companies in the same sector to discuss the IR challenges they were facing. Between 12 and 15 companies were involved, and the group came up with some novel ideas for pooling resources and budgets – in some cases exploring sharing licenses for software and IR tools across different companies. As the group became more established, there were more ideas for how the companies could work smartly together.
‘We decided that those of us that weren’t competing for the same capital could get together for roadshows – non-deal roadshows mainly,’ Nemeth recalled. ‘We went out to the market and set up meetings where we would all present. We were pitching to general investors in our market cap range and we found it was more effective than wasting money on the free lunch brigade.’