Managing IR with less than $10,000
As the old adage goes, few things in life are free. But AJ Krick, chief financial officer at Smith-Midland, is putting that to the test by putting together an IR strategy with little or no resources.
Smith-Midland will celebrate its 60th birthday in 2020. The concrete company went public in 1995 and for the first year the stock price fluctuated between $5 and $6, but by 1996 it had fallen to around $1. The stock continued to move in the $1-$2 range for most of the next two decades, but in late 2016 something changed and the value climbed. It now moves between $7 and $8.
With this change in price, the company leadership acknowledged that it needed to begin thinking more about investor relations. Krick, who had been with the company since 2014, was appointed chief financial officer in early 2018 and given the job of masterminding an IR strategy. He was new to the world of investor relations when he took on the role – and it’s been a year of discovery.
‘As the stock price has grown, so has the need for an IR strategy,’ he tells IR Magazine. ‘That said, the [IR] budget is set at zero. We understand there will be some costs moving forward, but currently I’d estimate that we spend less than $10,000, not including my time. Trying to work out what we can do that doesn’t cost anything has been one of our main challenges.’
The average small-cap company’s IR budget last year was $208,000, according to the IR Magazine IR Resources report. Krick says there has been some pressure from investors to retain an external IR agency, but he says that could cost up to 10 times the assigned IR budget he has at his disposal.
Still, while presiding over such a small budget is a challenge, it’s not an insurmountable one, he adds. He’s relied on the advice of representatives from OTC Markets, which he says has been invaluable, noting that graduating to the OTCQX market made a big difference in terms of legitimacy and visibility.
At last year’s IR Magazine Forum – Small Cap US, Jason Paltrowitz, executive vice president of corporate services at OTC Markets, emphasized the importance of consistency in filings for small caps.
Based on advice from OTC Markets and his own research, Krick also began developing an investor-facing slide deck – based on what he’d seen in other company slide decks. ‘We have to paint a picture of why our company is a good opportunity for an investor,’ Krick says. ‘So the deck talks about the history of the company, what’s happening now and what we plan to do in the future.’
As he fleshed it out, he began to share it with some of the company’s investors. The initial feedback was positive, but the deck still needed some work. ‘The feedback was that it was great to see what we’ve achieved, but investors wanted to know who is taking the company into the future,’ Krick says. ‘They wanted more insight into our senior management team, what the vision for the future of the company is and what our spending is like.’ The 14-page slide deck now lives on the company’s investor relations web page.
Beyond this, Krick has been studying Smith-Midland competitors and other IR resources to understand how to structure earnings releases, to improve the company’s earnings calls and enhance targeting efforts. He listens closely to analysts’ questions on peer company earnings calls, so that he can further improve Smith-Midland’s own disclosures. Recently, for instance, he added the company’s balance sheet information to its earnings press release to foster better discussions with investors.
As part of his education in investor relations, Krick has also travelled to conferences as a free attendee to get a better understanding of the nature of the investor questions that are put to other public companies. He says this has been informative for him and cost only the price of a flight to the conference.
Heading into 2019, he aims to ramp up the company’s targeting efforts. He acknowledges that he may need to begin paying for conferences but he also hopes to partner with OTC Markets on investor video conferencing.
Krick also notes that perhaps the best way to make the company attractive to new investors is to just do his job. ‘As the CFO, you’ve got to get on the shop floor and run the business first,’ he says. ‘If you’re not making any money, IR doesn’t mean anything. You’ve got to focus on the business and your strategic goals. As good things happen with the bottom line, it’s my job to make sure that helps the stock price.’