Zed’s dead, baby, Zed’s dead. And for the most part, so are those small-cap investor roadshows, who’s sponsor fill their prospective clients with the promise of analyst exposure and investor interest, only to find their stocks falling flat, despite the five digit expense paid to these so-called exposure specialists. Need first-hand proof, look at the charts of Inovio and Oncosec. These two companies, now part of my investment past, are prime examples of delivering a potentially good message to all of the wrong people.
I can tell you first hand, the small cap companies, like INO and ONCS, which are so often pacified by conference compensated salespeople, are the ones most often ridiculed with behind the door jokes and jabs. I’ve seen it, watching conference promoters smiling more at the commission earned than from the exposure they supposedly procured for their needy client.
The Road Show Is A Dinosaur
Roadshow get-togethers were once the mechanism for emerging companies to strut their stuff, sometimes pitching their wares in front of a full house of potentially interested investors. Much has changed over the years. Now, these small companies are often paying upwards of $25,000 to get the attention of perhaps five analysts, mostly entry level guys that are forced to be there. These small companies also believe that they impress their investor base by posting a press release on a PR Newswire, boasting that they are attending a roadshow that will have top analysts present to listen to the company accomplishments. Hogwash!
The reality has changed. And, while these hopeful small-caps are still footing the bill at Peter Luger’s or Morton’s, with several bottles of expensive wine consumed, the result is typically a flat response, a deterioration of share price and a lack of coverage as promised.
It’s a shame that these vulnerable companies are still caught up in the nonsense. Take the following three stocks, for instance, OncoSec (ONCS), Cellceutix (CTIX), and Inovio (INO). Each of these companies has promise, and each has consistently published news that was worthy of investor consideration, and at the very least a bump in share price. However, aside from perhaps a brief blip upward, each of these stocks has decreased appreciably from recent highs, and ONCS and CTIX have recently fallen into sub-dollar status. The troublesome part for investors is that while the senior management was hamming it up with insincere hosts, the market cap of their companies suffered tremendously. I don’t hate the players; I hate the game. Because, as I have witnessed, the commissions earned are far more important than the client, and once one company falls away, they aggressively lure another into its unsuspecting jaws.
Recent Roadshow Pitches
Pull up the latest headlines for INO, ONCS, and CTIX. Each of them proudly boasts of their pending attendance at an upcoming roadshow, as though investors should embrace the idea that somehow the few that watch the presentation will magically transform the company from unknown to a feature on a highlight reel. Far from it.
Publicized shows like the Bio-It International Convention, the Stem Cell Summit, and the countless number of the major institutional showcases have turned out to be nothing more than expensive road-trips, where fancy key-chains and stylish pens are collected from the attendees, followed by expensive dinners and a boatload of laughs. All enjoyed on the shareholder’s dime.
Take ONCS, for instance, a stock that I recently sold. During the past three months, they either attended or presented data at seven conferences across the country. Price in the cost to present, the travel, the per-diem meal costs, the “one-on-one” dinner dates, and shareholders should not be surprised that at least a couple hundred thousand dollars were spent to increase exposure to investors. The problem though is that ONCS share price has decreased by over 20%, now flirting with the sub-dollar territory as it collapsed to .98 cents a share on Tuesday. If ONCS were a bad company, I would say they deserve the punishment, but that simply is not the case. They have real science, have generated strong results, have partnership agreements in place with large pharmaceutical companies and continue to move the science forward. But, perhaps if they allocated their marketing dollars correctly, the share price would trade in stride with clinical progress. Wake up, OncoSec, despite the 1:20 reverse split that you put loyal shareholders through in 2015, the share price is gravitating back toward that level where you would face delisting pressures. When that day comes, shareholders like me, who once held over 10,000 shares may be reduced down to 50 shares, and watch as the management team remunerates themselves with repriced warrants and an increase in stock-based compensation.
It’s not a joke, ONCS! Do you realize that as you are perpetuating the ways of the past, other companies in similar size and clinical success are utilizing 21st-century methods of exposure? These companies are targeting tens of thousands of investors through a single Twitter feed, a Facebook post, a syndicated article or from a CEO podcast. These marketing methods have actual investors listening that are willing to pull the trigger on investment if you tell them what they need to hear. I don’t think you are, and its a shame. But, my guess is that your management team is caught up in the “short” sellers “fake news” campaign that suggests that 21st-century exposure is akin to a pump and dump campaign. Either that or you are simply scared into a shell and continue to ignore essential marketing practices that have proven capable of generating shareholder value. Your problem, ONCS, is that you quit talking to your shareholders years ago, and ever since then your share price has suffered.
Paying for an effective marketing and investor relations service is neither illegal or a waste of time. And, I’ll explain why later, but for now ONCS management should read about a couple of other small companies that are in the same position. Sometimes, misery loves company.
CTIX, Please Get Help!
Cellceutix (CTIX) is a good company, and I am long the stock. They have produced nothing but positive data for several indications within its robust product pipeline. They are demonstrating tremendous clinical results for both Brilacidin, Kevetrin, and Purisol, each of which exploits a significant market opportunity, may attract key partnerships, and generate substantial revenue through a partnership or licensing agreements.
For its contribution to the ancient way’s, since September of last year, CTIX management has attended five conferences around the country. Share prices at that time hovered around $1.35 per share, about 37% higher from Tuesday’s close of .87 cents. Despite the promise during the pitch, these overpriced roadshows delivered no shareholder value, and for those that argue that “these things take time,” I tell them to take a look at what is going on around the markets and how things no longer “take time.” The news is breaking, the news is immediate, and news is valuable. An unenthused crowd at a conference, while perhaps promoting some short-lived social relationships no longer is the most efficient method of conveying a public message.
As for coverage, companies should not fool themselves. For a stock like CTIX to gain coverage, it’s paid for, either by agreeing to let the analysts firm handle the future fund-raising needs or through attendance at these overpriced semi-annual conferences that each one likes to pitch. Conferences are the cash cows for large institutional and brokerage firms. Unfortunately, the small companies are often made to be the cows.
CTIX took a hit from a ridiculous “short seller” article that was proven to be erroneous in nature. But, casting all of the blame on that is similar to Obama blaming George W. Bush for everything that went wrong during his administration. Active management gets up, dusts themselves off and marches forward. And, while CTIX management is clearly advancing its agenda, the share price can’t grab traction. During the past three months, CTIX has published over nine compelling reasons to purchase the company’s stock. Each highlighted the strong results, sometimes best-in-class results that should have quickly caught the attention of growth oriented investors. But, despite the news, the share price has continued to sink.
What is CTIX doing wrong, some will ask? Well, to start with CTIX management has failed to identify who they are trying to talk to in their flux of releases. While all pertinent, each PR is failing to tell the story of how the drug featured can either better the standard of care or can attract partnership opportunities that can lead to substantial revenue streams. Although the news is good, each piece, sometimes two per week in the latest month, may be dilutive to the message and investors simply begin to tune out the news, expecting to read the same message in a slightly different narrative.
Even though press releases do not cost a significant amount of money, when they fail to accomplish their intended goal to inform and educate, they begin to take a human toll, deflating morale and having management believe that whatever they do, the company simply can’t attract a bid.
Things can change at CTIX, and they only need to find the audience that can bring the most value and talk directly to them. Nothing too scientific, just explain why CTIX is a sound investment in words that the average retail investor will understand.
Inovio Languishes Despite Great News
The story is no different for Inovio. Despite the tremendous clinical progress made by the company, the shares are now trading almost 40% lower than where they were just a year ago. The company has consistently delivered compelling data on present and pressing issues including Zika, Ebola, and cancer. INO has received industry credit, has been awarded grants and awards, but, yet the share price sits at roughly $7.00 a share, a far cry from the sweet talking analysts that pegged them at price targets exceeding $18 – $25 a share.
Inovio attends its fair share of roadshows, some outside of the United States in their hope to generate company interest. They maintain dedicated investor relation staff and hire outside, consultants to assist with their roadshow details. Credit INO for having some skill at using current and efficient methods of disseminating news, however, as an investor in INO for over four years, the stock’s chart has been uglier than a wart plagued witch on Halloween.
For the INO investor, those that “trade” the stock have had the opportunity to do well, now learning the trend to sell on the news, as the company has been unable to hold any recent gains. INO follows the crowd, entertains analysts, wines and dines the gang and fall’s prey to worthless roadshows that have been nothing more than a cash drain and a waste of resources. INO does not need to sit in a room with six attendees and preach the clinical gospel to them, when they have the same opportunity, at far less expense, to reach thousands, if not hundreds of thousands of investors by using modern technology.
Maybe someday they will, but they need to see that buying the affirmation from analysts has become a worthless vice. And until they do, investors hold the brunt of the downside risk, watching cash balances decline and investor morale sinking lower by the day.
Okay, now the question begs, what should these companies do?
First off, all three of these companies need to quit falling victim to the continued misleading propaganda that paying for legal, fully disclosed, and professional marketing is a bad thing. It’s not. Throughout each day, I am pitched different messages by pharmaceutical companies, each spending millions of dollars a month or more for the privilege to MARKET and ADVERTISE their drug. On the bottom of the screen is the company logo, in bold print so that the viewer can see who exactly is paying for the “promotion.” And, these companies can exaggerate the message as much as they want, they simply add the disclaimer to make sure we understand the pitfalls of using their product.
Yes, I said, “promotion,” a subjective and misused characterization used to describe what only “small-caps” do to advance their company. For companies like ONCS, CTIX, and INO, they have been scared into a shell, hiding from the notion that if they pay for effective investor relation services, they will be painted as an unscrupulous pump and pump organization trying only to pull dollars from unsuspecting investors. That is total garbage.
Barring illegal activity, small companies, just like the beheamoths, have every right to use whatever tools necessary to expose their business and their science. They owe it to their shareholders, as well. It’s not okay for Merck to have the right to pitch me a 30 second add about a drug that may make me bleed internally, cause excessive vomiting, get sustained headaches or produce explosive diarrhea. It’s even less okay to say then that it is not appropriate for CTIX to pay money to promote Brilacidin, Kevetrin, and Purisol, which may very well be the next standard of care for each indication. It simply is not a crime to sponsor a message, and these small cap companies need to grasp reality and begin to fight for their very existence.
The same goes for ONCS and INO. Despite senior management proudly pulling down million-dollar salary packages, consider the fact that the shareholders that helped keep the share price high during recent fundraising rounds deserve to be watched out for as well.
Promotion is not a dirty word. In fact, it is the bastion of capitalism. We promote to get attention, pure and straightforward. If a company like INO, CTIX or ONCS pays $25,000 to attend a roadshow, shareholders should demand that the money is better spent, perhaps in a manner that can generate and sustain shareholder interest.
Here’s a quick story for those CEO’s that think an analyst handshake is worth its weight in gold. At a recent conference, a promising small cap company had concluded a Monday night prep meeting with several “interested analysts and investors.” The cost of the meal exceeded $3,000 and included some professional talk, a few bottles of wine and a delicious, but overpriced dinner. The next day, the group met in the lobby of the hotel to strategize on how to win confidence. They went their separate ways and met up later during the formal conference. As the discussion rambled, everyone appeared to be listening intensely, not missing a word of what the CEO was telling them. At the conclusion, one of the listeners leaned over and said that the science is great and that he will have tremendous interest from the trading desk. They all shook hands, smiled and gave pleasantries as required by traditional etiquette. However, as the CEO was leaving the room, one of the gentlemen spoke a bit too loud, saying, “what a sap,” apparently alluding to the CEO who was just given so much praise. He hesitated, thought for a second and quietly went on his way. But, it was the last roadshow that he ever attended.
The story drives home a simple point. As these small companies continue to ignore the retail base and concentrate on big ticket brokers that don’t even invest in penny stocks, they are driving a wedge between the most important tool they have in their arsenal. Retail investors keep small-caps inflated, based on the promise of these companies, proven out by serial data released by the company. Once they lose that base, the share price drops precipitously, down to pennies a share in many cases, never to recover from short sellers and lack of institutional support.
But, there is a method to stop the hemorrhaging of the stock price. Promote your companies. Legally! Not only will you most likely substantially increase your coverage base, but, there is far less chance of being called a “sap” by a person that has been paid to be your friend for an hour.
Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.
While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.
I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.
Additional Disclosure: I am long CTIX and may purchase additional shares within the next 72 hours. I have no position, LONG or SHORT, in INO or ONCS and no plans to initiate either a long or short position in either INO or ONCS within the next 72 hours.
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