When the investor relations activities aimed at attracting individual investors, small companies and micro-cap, should be aware of the characteristics in which part of your company.
MicroCap The term covers listed companies with a market capitalization of less than U.S. $ 150 million (*), which can be classified into investment growth (in growth), or investment value (in which the value has already been expressed), or both.
The investor relator and the top management of companies should be aware that:
1. for their classification in respect of the investment is always necessary to consider the life cycle in which it is actually running the company, which can be inserted from investors, including business growth and value companies.
2. Low floating micro-cap companies always have an impact on their stock value.
3. The risk / return of the shares of the MicroCap classified as an investment is inappropriate for many small investors.
4. Quantitative research indicates that the return on shares is always proportionate to the risk that the title you have.
5. Research also suggests that the return on shares MicroCap often goes in the opposite direction of returns data from large-cap securities.
Therefore, investor relations activities aimed at individual investors should focus on finding investors, High Net-Worth Individuals and as a result of their Advisor.
The following is a summary of research done in the U.S. that supports this thesis (**).
The top management of a company with high growth must consider the actions of your company in the context of the capital market, and know that the appeal of his company is always seen in relation to other equity investments.
The financial market is very fragmented and there are many players present. There are many investment advisors and many fund managers who see the growing company as an investment alternative to large-cap or bond. Many investment advisor assigned to the category of MicroCap the same high risk / return that is assigned to high-yeld bonds that certain types of hedge funds.
That said, not all fund managers invest in equities and MicroCap not all investors are an appropriate target for the activities of companies MicroCap Investor Relations. In fact, in the U.S. there are numerous studies supporting the fact that the most vital targets for individual investor MicroCap companies, both HNWI (High Net-Worth-Individual).
That said, not all fund managers invest in equities and MicroCap not all investors are an appropriate target for the activities of companies MicroCap Investor Relations. In fact, in the U.S. there are numerous studies supporting the fact that the most vital targets for individual investor MicroCap companies, both HNWI (High Net-Worth-Individual).
equity investing should always remember that it incurs a return commensurate with risk. The higher the return, the higher the risk.
MicroCap actions generally are considered much more risky by institutional investors of the shares of large cap companies. Therefore, the micro and small cap shares, are securities in which people have to invest with limited capital, inexperienced people, with low risk appetite and not the actions on which to bet his entire fortune. Securities are not suitable for speculation or easy money, unless it falls into the category of professional traders and institutional investors. The truth is that the actions MicroCap are relatively risky, speculative and in some cases are almost always considered as a medium to long term investment. They are a reasonable and appropriate asset class for people with a good heritage and a discretionary investment capacity (HNWI).
Although the actions of MicroCap companies are also known as alternative investments, fans of these titles indicate that such shares are attractive because they are generally able to license potentially grow more than others. They also believe that this prevailing market failure provides a real opportunity for diversification in an investment strategy that differs by market capitalization. This requires some significant differences in the performance of the market capitalization share more widely.
The fact that many do not pay dividends MicroCap simplifies the consideration for which MicroCap the return of the shares goes against the trend with a return to more large-cap shares. What does not simplify the discussion concerns the transaction costs on investment in MicroCap which are quite high.
Transaction costs and result in reduced liquidity floating enhance and complicate any challenge to the license MicroCap Investor Relations. Some research suggests it as the return of the portfolio affected by transaction costs.
In 1998, the Plexus Group ,(**) a consulting firm in Los Angeles, completed an extensive research confirming that the transaction costs charged to the actions of smaller capitalization companies were much higher than the costs that were applied to the trading of shares at higher market capitalization. The study also confirmed that the investment style could affect investors' transaction costs, as well as brokerage fees.
Investors in large caps have beneficial transactions costs, while investors in small cap support higher transaction costs than investors in large cap, and MicroCap investors to suffer the highest costs of any other investor.
In the U.S., studies of stock returns using data compiled by the Center for Research in Securities Prices (CRSP) for making comparisons between different capitalization securities. The data of the market capitalization of CRSP are organized into deciles. With reference to all actions of the NYSE (excluding REITs (Real Estate Investment Trust), ADR and closed-end funds) and dividing them into deciles of market capitalization to create the CRSP deciles which are also added to the actions of the NASDAQ and dell'AMEX. The actions fall within the larger capitalization deciles 1 and 2. The Microcap in deciles 9 and 10.
Over the past 70 years, Rolf W. Banz University of Chicago began to study the return on the shares based on their capitalization market. His research suggested that, even after adjusting for risk, small cap shares seemed performs better than the large cap shares. Banz and his colleagues subsequently published a book in which he stated that the actions of the smallest market capitalization deciles of CRSP had generated a return of 5% higher than the performance of the shares of larger capitalization, on the same timescale. Researchers have attributed this excess profit to the risk premium for the possession of small cap shares. This observation was discussed among academics in the context of Capital Asset Pricing Model (CAPM) and is known as the effect size.
Investors in small cap companies - including micro-cap - always cite these studies.
As already mentioned, the return on securities of companies Microcaps goes in the opposite direction to the securities of companies with large capitalization.
The reason for this is that the titles are the latest headlines MicroCap to be exchanged, because investors are returning to MicroCap when they realize that the large cap shares are overvalued. They are the latest actions to be sold in a market that goes down because investors are reluctant to sell their shares in spite of a less liquid market of buyers. We refer of course to investors operating MicroCap actions with a time horizon of medium to long term.
The reason for this is that the titles are the latest headlines MicroCap to be exchanged, because investors are returning to MicroCap when they realize that the large cap shares are overvalued. They are the latest actions to be sold in a market that goes down because investors are reluctant to sell their shares in spite of a less liquid market of buyers. We refer of course to investors operating MicroCap actions with a time horizon of medium to long term.
So the best ingredient to deliver the securities and exchange MicroCap liquidity is stable and continues to create a broad base of high net worth individuals. The time taken to identify, contact and to inform investors of this group of Advisors is a necessary investment. These can be
Stockbrokers also one of the best lines of defense, and good allies, when market negative economic trends or periodic lackluster results, depress the share price. They can become a lever influential community, as able to provide their customers with macro and microeconomic interpretations of events, in support of the title.
Stockbrokers also one of the best lines of defense, and good allies, when market negative economic trends or periodic lackluster results, depress the share price. They can become a lever influential community, as able to provide their customers with macro and microeconomic interpretations of events, in support of the title.
(*) Source: BNYMellon (February 2009 survey)
(**) Source: Bloomberg, Investor Relations
translation and free adaptation of Fersini Mastelloni White, CEO of Polytems Hir
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