Greed is not Good

July 16, 2014 Blog 0 Comment

By Simon Watkin, Principal Market Connect Investor Relations and Corporate Consultancy

ASX and Corporate Australia

The ASX and corporate Australia have created a monster. In their bid to increase corporate fees and drive ASX listing fees and on-going revenues, smaller companies in particular are too easily passing any quality and listing tests and attracting retail investors on the back of “Blue sky” unrealistic pipe dreams.

The ASX seems not to have any quality measures for listing with the fees that they derive being the main objective. Similarly corporate capital raisings particularly in relation to smaller companies are being filled by unsophisticated retail punters who are showing blind faith in the Company’s and corporate broker’s overly ambitious expectations which seem to fit into the over-promising/under-delivering category.

How often have we been misled as to the timelines and risks that non-revenue earning companies face in getting a product to market!
Yes you can fool some investors, particularly the non-sophisticated retail punter and yes you can get your Company listed on the ASX or raise funds to keep the lights on, pay some salaries and do some product/project development, but you can quickly lose credibility on the back of unrealistic expectations. I can’t fathom how corporate brokers and companies come up with some “Blue sky” valuations given the hurdles and costs to progress an idea, a technology or a resource venture.

Companies should build their shareholder base not destroy it. You want to be able to go back to them and say we did what we said we would do which has improved our prospects and now we would like to keep going to build more value so can we count on your support? If the initial expectations are reasonable, the market will take care of the Company’s share price and the value will increase on satisfaction of those achievable milestones. Your shareholders will stay with you and you can go back to them for support, but if you over-promise and under-deliver they are gone for good!

So Companies should think about their long-term survival, set realistic and achievable milestones and value their shareholders into the future. Plan your communications and investor relations strategy, be good to your shareholders because they own your Company. It is not “your” share price, it is “theirs”. Credible communication is the key to increasing a Company’s profile and to building positive market sentiment and shareholder loyalty.

Plan ahead for corporate initiatives and work with corporate consultants that understand how to build value, not destroy it for the sake of a quick fee. Like the Company, they too will struggle next time they put their hand out to investors who have lost patience, been misled and are long gone!