Businesses have broad ranges of key publics or constituencies comprising customers or clients, vendors, employees, governments and regulatory agencies and, in the case of public companies, shareholders and the financial community in general.
While all of an enterprise’s constituencies publics are important, arguably the customer is prime among them: if not well-served in terms of product, service or support, the customer has options, not the least of which is the plethora of competition that drives the business environment.
The business environment today is challenging to say the least. The housing market has all but cratered, taking with it the construction industry; retail sales, if one delves within the numbers, are softening as the consumer tightens his proverbial belt, struggling to make mortgage payments, often subprime, especially here in Nevada; and the stock market for the past couple of years remains an enigma, poised for deterioration. These, in conjunction with a number of other economic indicators mitigate toward businesses maintaining if not enhancing their respect and service for their customers or clients.After all, customers, clients and shareholders have alternatives and options – it is the shareholder, especially one who has a position in any number of companies in Las Vegas, who will service as metaphor for this essay.
Increasingly, in Las Vegas, we have been seeing public companies who appear quite simply not to care about their owners: the shareholders. These are primarily companies that believe they fly under the radar of regulatory agencies, as they are mostly traded on the Bulletin Board or Pink Sheets, though some on Nasdaq itself. Nonetheless they remain “reporting companies.” Most sell for less than a buck, often less than a dime, but some in excess of more than $3.00. All have market capitalizations of under $200 million and one under $2 million. And, these stocks actually trade, albeit in narrow ranges, but so-investors trade all of the stocks daily.
However, none of them seem to care about their primary constituency: the shareholder. These small companies seem content to issue what they consider promotional news releases at the drop of a proverbial hat, apparently because they believe they can drive up the price of their stock. When we mentioned “trading in a narrow range,” we were euphemistic: these stocks trade mostly by appointment.
But when it comes to material disclosures, disclosures that provide investors with information and data required to make informed decisions on their investment postures, these companies fall woefully short. In fact, with the exception of one (which disseminates news in what appears to be a bare bones afterthought, providing the reader with no background or information expanding on its current financial position), not one as far as we can see has ever disseminated a news release on quarterly results. Oh sure, a 10Q is filed, but how often do retail investors even see an SEC filing, let alone read it.
Retail shareholders can be a vocal demographic. One just has to look back a few years to the surfeit of class action shareholder suits that were filed. These companies, and many like them today, seem to forget those years; apparently preferring to think that SEC filings are all they require. They forget who their real owners are: their shareholders.
But what about the professional financial community? If it has any interest in these companies at all, it’s a taste at best. That demographic knows quite well that there are thousands of companies competing for capital that don’t require odds twists and turns of financings and intrusions by bottom fishing quasi-investment bankers.
Oddly enough, some of the companies actually have Investor Relations programs comprising almost curiously high fees with similar expenses paid to stock promotion publications and internet outlets. Yet they remain in their narrow, low trading ranges. One would think they’d learn and in that old Wall Street term, “stick to their knitting,” focusing on operations and driving profitability rather than watching the price of their stock. On the other hand, that modus operandi is no doubt a plus for big pharma’s psychotropic product sales, as it can be quite unnerving.
And of course, there’s the Securities and Exchange Commission under whose radar no company ultimately flies.
Without a continuing dialog and concern for shareholders, customers and clients, enterprises, public or private can face only a dismal future at best, failure at worst, especially in today’s economy.
Stern And Company
info @ sdsternpr.com