Tip of the Week: Building Post-Merger Support
By David Feldman at 28 January, 2008, 8:48 pm
You’ve done it all—found a shell, completed the long and daunting due diligence process, closed the deal—now what? The following tips, as described in my book, will guide you through the next step, gaining market support. Going public was just the beginning, it’s what you do next that counts!
Get a new attitude.
Going public is the 1st step of the process to becoming a public company. The first day trading is not important; the big picture lies in the trading activity 1 year to 18 months after the reverse merger.
Look at the long-term benefits of being a public company; raising money, using the stock as currency for acquisitions, and having stock options to provide incentives to management.
Big picture: the company should focus on long-term goals.
The importance of investor relations.
Investor relations (IR) firms attract attention from Wall Street firms and research analysts to improve trading and stock price. The better IR firms take a long-term approach to building market support. There are many shady IR firms that promise quick results. Even if their practices are not technically illegal they generally conduct bad business. They will often create temporary fixes and then disappear leaving the company with a mess.
Big picture: A strong, reliable, and legitimate investor relations firm can make all the difference.
Earn your support.
Support is earned when a company achieves the things it promises to achieve, and when it does the things that investors and Wall Street want or expect from it. Focusing on running the business to generate profit and long-term value to shareholders will achieve the best results.
Big picture: Support from Wall Street should be built the old-fashioned way – by earning it.
Movin’ on up.
Smaller companies start out on the OTC Bulletin Board or Pink Sheets, hoping to move up to Nasdaq, the American Stock Exchange, or the New York Stock Exchange. The move up will generate attention that will result in higher stock prices and market capitalization, easier financing, more acquisitions available, and even attracting senior executives.
In order to move up the company needs to qualify for the higher exchanges. Each exchange has qualitative and quantitative criteria it uses to allow a company to list its securities.
Big picture: All the benefits of being public come into focus on the larger exchanges.
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