Friday, May 27, 2016

Stop Touting Penny Stocks & OTC Micro Cap Companies: How to Maximize Your Investor Relations Campaign with Social Media

The Investor Relations Series is supported by Cervitude Intelligent Relations, a leading investor relations firm for public companies trading OTC, TSX, Nasdaq and other public company stock exchanges. Cervitude Intelligent Relations offers company promotions and business development services for micro cap companies and penny stocks. Visit for recent industry research, whitepapers, news and updates.

Social Media has been used and abused by penny stock promoters since its inception.  Commonly stock touters unknowingly and uncaring promote the daily volume of penny stocks or small cap stocks trading over the counter and hint, urge or flat out recommend the purchase of the stock.  Social media platforms like twitter, facebook and blogs are riddled with "touters" that seek to pump up the stock, and some do, but most companies (some of which directly hire these "touters") don't see any long term benefit and most stocks being blasted through social media end up plunging after the short sprint promotion is over.  And the aftermath of perception it brings to real investors is catastrophic.

Blogs and other social networks can work tremendously for companies if they used them to sell their goods or services, after all, their is a company underlying the stock that is looking to make money right?  I give you two different accounts in social media and you can determine for yourself which becomes more appealing to investors:

  • Social Media Post #1: Stock Symbol XXX trading today with heavy volume, reaching new lows and a great opportunity to buy!!  Quarterly financials showed 8% growth!!!
  • Social Media Post #1: Company XXX offers new time saving service to client in the business sector, see how you can save by using our/their services

Here's the deal: Most OTC Stocks are available to be purchased only by accredited investors, this means the 21 year old in his dorm room with no assets and $5,000 to spend on penny stocks is restricted from buying them.  The focus thus becomes venture capital and institutional funds, family offices and angel investors.  Are they looking to social media for a good stock pick?

The focus of this article is how to maximize your investor relations campaigns with social media, now knowing that the target market for a penny stock or micro cap companies trading over the counter are (1) Funds (2) Family Offices and (3) Angel Investors; let's take a quick look at what they may see on your social media platform"

Venture Capital & Institutional Funds
Fund and VCs that normally invest in OTC stocks or Penny Stocks come in various forms but for the past few years more and more are present ready to buy your the right price.  This price is generally well below market value (purchased in block amounts) and most players in the micro cap sector are selling their stock at a profit as soon as they can.  Buy low, sell high.  This allows them to continuously sell their purchased shares at a profit (sometimes) and re-purchase shares.  The issue becomes the downward pressure the sell-off by the funds cause.  This depletes the stock price, already low pennies, and the end game is a sub-penny stock that eventually dissipates.  If you can get them to buy into your long term vision of the company, the discounts are not as great and some investors even buy on the open market.

Family Offices
These offices, generally funded by a family or individual, at times seek long term investments and at times look for the same thing as funds.  Again, you have to sell them the vision, if not, you are selling them a security and this okay, but the vision unlike a financial instrument like a stock; can be invaluable.

Angel Investors
In the past finding a real angel investor was hard; they were far and few in between and they did not advertise.  Today sites like Angel List, Gust and a slew of new equity crowdfunding websites host a wide variety of "angel investors" or at least people whom have set up profiles and act as angel investors.

Well...are VC, Funds, Family Offices & Angel Investors looking on Social Media for their next investment???

Sort of.  Depending on how you define social media your prospective investors are already to sitting out on the Internet waiting for you to call them.  From LinkedIn to Twitter many executives or funds or venture capital firms are easily find-able.  While they may not be looking for an investment online, you can be sure that most will do due diligence and check your social media profiles if you contact them or if by chance they happen to find your company.

So How does your company Maximize Your Investor Relations Campaign with Social Media?

Part of the answer was in the title of this blog post; Stop Touting Penny Stocks & OTC Micro Cap Companies and start promoting the actual business!  In the 2 sample social media post mentioned before in this blog post, only one will drive traffic to sales for the company while the other may drive temporary stock purchases.  Here are the reasons you should focus on company businesses rather than promoting the fact that you are traded publicly:  

  • SEC rules frown and sometime outright forbid touting securities (especially during the quiet period between when a company files for registration of securities and the time the SEC approves the registration of those securities).  
  • Long term investors care about your business and the vetted investor can tell a stock pump promotion over a company that is building a sustainable business (ie those companies whom are touting their services or products vs their stock)
  • Social media can help the sale, pre-sale or bulk-sale of your product or service, which in turns generates more revenue---which ends up on your SEC quarterly filings.  And this is what investors really care about.  Show improve; if your revenues are up quarter after quarter you can almost assure liquidity in your stock, research coverage and cheap capital.  

In short, your social media should compliment your business story/pitch.  If your pitch deck or powerpoint presentation to investors showcases the development of a search engine or a gold mine and your twitter and facebook are constantly posting about your trading volume or a new research report that promotes a new "buy rating" on your stock; you are not telling the same story on social media as on your website or pitch.  

Be authentic, be bold and build a great business and there will be no need to "tout" your stock.  You will be able to maximize stock promotions and investor relations because their is a solid growing business underlying the securities you are offering or are trading on public markets.


About the Author: Nicholas Coriano, JD is an Entrepreneur &  Business Consultant.  He has worked at Merrill Lynch, The New York Stock Exchange and is currently a partner at Cervitude Intelligent Relations.  Learn more about him here. He is the author of Rules For Entrepreneurship available now on Amazon.

About MicroCapCompany.COM: MicroCapCompany.COM (The Blog) is a blog focused on providing articles, news and information on the micro cap sector and start-ups.  The Blog is a free service offered by Cervitude™ Investor Relations - a micro cap investor relations firm for micro cap companies and penny stocks.  If there is a particular topic you would like to see covered on The Blog, email us. If you would like to advertise on The Blog, click here. 

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