Many business owners envision the idea of taking their company public as the ultimate exit strategy, with many millions or even billions of dollars waiting at the end of the rainbow.
But is “going public” really all it’s cracked up to be?
What are the different ways you can take your company public and what are the potential downsides of the effort?
This week’s guest, Stephen Kann, is a partner at Bridgewater Capital, a capital markets advisory firm that helps companies go public and navigate being public. In 25 years they’ve been involved in over one hundred transactions totaling well over $1 billion.
There are a lot of ways to take your company public, but in this conversation Frank asks Steve to focus on just three: an Initial Public Offering; a Special Purpose Acquisition Company; and a Reverse Merger.
Frank will also share his experience as the CEO and Chairman of a Dot Com company that went public using a reverse merger 20 years ago.
If you’ve ever entertained the idea of being the founder of a public company, you don’t want to miss this conversation.
Connect with Stephen Kann on LinkedIn: https://www.linkedin.com/in/stephenkann/
What follows is a computer-generated transcription of our entire conversation. Please excuse any typos.
My guest today is Steve Kann. Steve is a partner at Bridgewater Capital and he’s the bestselling author of the investment book Microcap Magic. Steve Kann, welcome to the program.
Thanks Frank, nice to be here. Thanks for having me.
Well, regular viewers and listeners will know that in recent episodes we’ve been talking about selling your business and we talked about different ways that that can happen. But one way we haven’t discussed is selling your business to the public.
Steve and I are going to talk about three ways for you to take your company public We’re going to talk about IPO’s. We’re going to talk about something called a SPAC, and we’re going to talk about reverse mergers. Now, have no fear, Steve will explain what all those things mean and what they might mean.
Let me start out with this. I want to make it clear what Steve and Bridgewater Capital do and in order to do that, I’m going to have to read it to make sure I get it right.
Bridgewater Capital is a capital markets advisory firm that helps companies go public and navigate being public. In 25 years, they’ve been involved in over 100 transactions totaling well over 1 billion dollars. So does that button it up pretty well as far as what it is that you guys do, Steve.
That’s the high level that works.
All right, well, we’ll dig into the weeds, starting right now. So I want to start a very foundational level. What is the difference Steve or what are the differences between a private company and a public company?
What is the difference between a private company and a public company?
Well, a private company is often referred to as a closely held company. Meaning there are several or a couple of known shareholders. These are two partners that founded it like you and I did years ago. Frank or it’s, you know, friends and family have helped you start a business, but it’s private.
It’s only in the that little cocoon of well-known shareholders is the company.
Public company, sort of, by definition, has anonymous shareholders. These are shareholders are coming in through various mechanisms to be a shareholder in the company, and they may have very small stakes in the company and that company is typically although a public company is not always publicly traded. I’ll get to that in a minute if you like, but.
It’s a shares that are held that can be bought and sold.
Through your brokerage account.
I see now what about?
As you mentioned, you and I had been business partners in the past and we did and we’ll talk about this further. We brought that company to become a public company. One thing that I want to drive at though as far as the difference between a private company and a public company from the perspective of the business owner is sort of the fiduciary duties and.
And the reporting requirements and that type of thing. Can you give us, you know there’s so many different things that have to be filed, but what?
What sort of a burden would somebody be looking at from a reporting standpoint if they were to choose to go from private to public?
Well, to be a public company, as I said, means to have a certain number of shareholders are over threshold. If you have over 2000 shareholders, for instance, you must become a public company. You are required to under US law and that you have to report you.
The fire reports with the SEC quarterly and annual.
As such, but you actually don’t have to become publicly traded, those are two distinct things. Interest all. Yeah, we call it being public means you are publicly reporting being publicly traded. Major publicly traded your trading on an exchange. You’re trading over the counter or what have you now you know.
And usually you can actually trade but not be reporting to the SEC, and those are the stocks you might have heard of this trade on the pink sheets.
And this is sort of a buyer beware market where they have enough shareholders to where there is a reasonable expectation of a market developing in the stock. A secondary market trading back and forth between shares.
But they have.
For either cost reasons or you know, convenience, practical reasons, they don’t decide to actually report.
To the public, so there’s less transparency.
I see and as one might imagine, we could really dig down into the weeds.
On a lot of these topics, but we don’t have all day, so I’ll try to figure out where we need to go farther down a rabbit hole and where we were gone far enough. Let’s as I mentioned, we’re going to talk about three different vehicles through which firm could go public and the first of those is an IPO, and that’s the one that most people think of.
And I’ve heard the most about can you tell us you know what is an IPO? What does IPO stand for and why is it that it’s the one we hear about the most?
What is an IPO?
IPO is initial public offering and it is exactly as it sounds. It is the initial offering of shares in your company to public shareholders, that is, those anonymous shareholders. Typically, that is typically done through a brokerage firm, a broker dealer and investment banker who has a clientele who are interested in.
You know, by industries such as your business is in and want to invest to make money and those shares are offered through the brokerage firm. They become your placement.
In your inner intermediary, or more Specifically, in an IPO, an under writer to get the capital you need in exchange for shares in your company that go out to those public shareholders.
Now, why is it? Do you think that that’s the one we’ve all heard the most about? It seems like those are the high flying. You know, the newspapers are reporting about it, and the business news channels and so forth.
Is it because they are larger transactions or is it because perhaps these are better known brands? Like why is IPO the thing that most people think of when they think of a private company going public?
Well, it’s long considered. It’s been long considered, you know the end game for a lot of high profile companies with big Investors venture backed companies, you know they’re backed by venture funds. Where that is the Holy Grail to become public. But provide liquidity for previous, you know existing shareholders when the company was private.
And so it tends to get the headlines because it’s sort of.
You know part of the American Dream story of, you know, taking your company all the way to the successful end. The other ways are going public or less sexy and frankly not as profitable to the industry. And so they don’t tend to get the kind of press.
To the financial services industry.
Correct, yeah, I see.
You also you just mentioned the word liquidity and something that I remember a phrase bandied about quite a bit was liquidity event.
And and I guess that’s part of the dream of the shareholders, and perhaps the biggest reason why people think they want to go public is because they’re going to have a liquidity event where they’re going to be able to sell a lot of shares and make a lot of money, and certainly not right away. But at some point in the near future, take a lot of that money.
From the shares that were sold and put it in their bank account.
How frequently do you think from that measure, IPOs are successful? What percentage do you think?
Well, IPOs for that by getting an IPO done, meaning you have an amount of money you wanted to raise and you’ve raised it, you’ve sold enough shares to the public in order to have met your minimum threshold for the amount of capital you needed. That in itself is a measure of success, right? And if the company executes, if the management team delivers on the promises they made.
During that process of going public and raising money then that company will probably.
Being successful, there’s lots of examples of companies that have been wildly successful after an IPO. I would say you know a large majority of them do succeed, but many of them don’t and it has to do with execution of the business plan. Not necessary, not not having anything to do with whether or not they did it as a public company or a private company.
Interesting.
You know this as you say, there’s so many examples of different companies that went IPO and then, you know, did great or when IPO.
Oh, and now their share value is lower than it was when it was first offered, but I guess your point is well taken that just because it’s below where it was offered initially doesn’t mean that the company isn’t profitable or there wasn’t a liquidity event or etc. But it does seem to me that I agree completely that you got to execute.
And yet, to execute a good plan. But would you agree? Or what is your take on this statement that there’s a lot of pressure that comes with going?
Public and there’s this whole thing about short-term decision making versus long-term decision making, where companies that don’t have the pressure of being publicly traded and reporting in the news reporting and everything else the private companies have a little bit more latitude and decision-making is there. Do you really think that the pressure on describing?
Could actually negatively impact a company’s ability to execute.
Without question there, especially in my universe is microcap stocks. That’s what the book is about, and that’s where I’ve lived for 35 years into 30 four years in this business. The smaller the company, the the sort of the smaller the smaller the margin of error is to make bad in making bad decisions.
And the pressure is manifold right? One you have to continue to access the capital. You need to execute that plan. The smaller you are, the lower your market cap the less your stock trades.
However, we need to to do that consistently, and that puts tremendous pressure on the company because not only are they trying to execute their business plan, but they also have their capital markets plan that they’re trying to execute and balance those, and that’s where you know Bridgewater steps in into the fray often is to serve that function to take that.
Off manage his plate, but the other real burden is once you’re public and you have anonymous retail shareholders out there that own your stock.
You do have this fiduciary responsibility to, you know, do what’s in the best interest of shareholders, and must put shareholders 1st. And that comes with it, a huge regulatory burden and a lot of risk for management and the Board of Directors. Which since Sarbanes Oxley, which was an act passed.
Yeah, many years ago management and the board are really on the hook, both personally and corporately for decisions they make that might adversely affect shareholders well.
And that’s something I just feel as though business owners and leaders need to keep in mind that yeah, there might be a pot of gold there at the end of the IPO rainbow, but there’s going to be a lot of new stressors that are on top of everything else that has to do with running your business that you’ve never dealt with before, and that really can.
Impact you personally have an impact on your quality of life as an individual.
Now.
I want to use as an example Tesla, and the reason I bring it up as an example is maybe 18 to 24 months ago. Elon put out this tweet and it ended up getting him in a lot of trouble with the SEC, but he talked about he had the financing lined up, lined up to take the company Private.
At $420 a share, and I just throw that number in there ’cause that may help people spark the memory of it and that quite cause quite a few.
Air Storm, but the reason I bring it up is he was sick and tired of all the pressure and all the institutional investors beating on his head and what’s what are you going to turn a profit and everything he was going through with trying to get model three production on? So at that point and this also happened with Dell computers. At one time they chose to step back.
Away from it and I just use that as an example of this pressure that we’re talking about Israel.
I don’t want to go down the rabbit hole of what’s it like.
To go back private again, but I guess I’ll just leave it at that. I just wanted to make the example that there are companies that we all know about who have felt the pressure and decided we’ve had enough.
It’s a huge hassle.
This is a computer-generated transcription. Please excuse any typos.
So the next question I want to ask you is I know that very few companies are either prepared to do an IPO or even have any sort of performance or business plan or intellectual property or something that makes them Special enough to be considered to go public through an IPO.
What kinds of firms qualify for an IPO?
What sort of things does the investment community look for in a company in order for that company to be considered for an initial public offering?
If they’re looking for wealth creation, right, they’re looking for opportunities to invest in a management team and in a business model or technology that is solving a major market problem solving.
Or addressing a very large market opportunity.
Nobody wants to invest in company hoping that they double their money in 10 years, that’s you know they’re not looking for bank account type returns. They’re looking for wealth creation, right? They’re looking for the whatever it is 300,000% Walmart’s up since its IPO or what have you. And so it’s a combination of.
Market opportunity the management team to address and take advantage or go after that market opportunity and the product or service or technology solution that is a market.
Fit for that opportunity, and if all those things are in place, then that becomes a reasonably attractive public offering, provided that it’s not too too early, right? There are plenty of firms that will raise money in your public offering or otherwise in a more Speculative type of opportunity. Earlier stage for the ones you hear about.
The Teslas in the Palantirs in the in the lemonade sets and so on, these are typically big bets and management teams.
At chasing very large targets.
Interesting, you know, and a question just occur to me that I hadn’t thought about previously, which has to do with Founders getting squeezed, diluted their ownership of the company. This is another thing that I think a lot of people lose track of. They think of somebody like an Elon Musk or a.
Or Zuckerberg at Facebook who still hold a tremendous percentage of the of the share.
There’s voting shares of the company, what? What sort of dilution might a mere mortal who was in a Zuckerberg or Musk expect to experience going through the process not only being going public, but even pre going public. When the venture capitalists and others are putting money in?
Let’s say he started he or she started with 100% ownership of the company, what? What sort of squeezes might they expect to encounter?
I have a different perspective on that, having been both an entrepreneur and investment banker, an investor and advisor to such companies and one of my mentors 30 years ago told me this and it really stuck and that is that whole year, especially early in your business. Let’s call your shares or representative. I stop stock certificates, right?
And these certificates are, you know, paper and he would say dilution. You’re trading paper for cash.
It’s the investor getting hungry.
But yeah, he’s well, I.
See, because he’s giving you cash for your paper.
Correct, and he’s putting $100 and you are and he’s only really getting only whatever it is. 12% of the value in present time of the 100 he’s putting in. Depending on how much of the company is acquiring, so to me it’s more of what am I left with at the end.
As an arch floor, Steve Case, founder of AOL, when he sold when they sold.
A while to Time Warner, he had 1% of the stock left. He was the founder of AOL, had 1% of the company and the poor guy only made 700 million dollars in that sale.
That’s great. What a great example, Steve, you really nailed that one. Thank you for that.
OK, I want to move on from IPO but is there anything relative to IPO? Said I haven’t asked you or thought you wanted to share before we move forward.
It’s it’s. It’s a tremendously.
Important decision. There’s lots of people in in in my business, especially in my space who are really.
What’s the word, their their? Their predators are in companies and their stories. They hear a good story in me to get management team and they leverage that the great work of companies got done to get to a certain point, to instant, to go public. Whether it’s an IPO or it’s a reverse merger. Or a SPAC as we’re talking about.
But really, they have ulterior motives and there’s a lot of sharks in the waters. We could be very careful. And it’s just a an IPO. Now is a very long, costly, frustrating process. You look at a company like.
The idea of a colleague of mine ran in the biotech space after a year for Aaron doing audits, hiring attorneys, spending well over $1,000,000 just to prepare to go public.
It didn’t resonate with investors and they had to pull the IPO and now they’re just where they were a year ago and they’ve not spent a lot of money damage to get to where they are and are no further along that path.
Wow boy, that’s a painful story.
What is a SPAC?
Yeah, OK, well let’s talk now about SPACs and I’ll let you tell us what that acronym means. But there’s been a lot of reporting about SPACs recently. An I think companies founders of leaders of private companies.
Maybe thinking Mo? Well maybe a SPAC is the way for me to go. If you would tell us what’s pack is an acronym for an then what does it mean?
So in fact is a Special purpose Acquisition Corporation, Special Purpose acquisition company that is really a management team that gets together with a sheet of paper with a plan that made everyone investment banking firm and says look at my pedigree, the pain management teams better look at my background, my experience, my Rolodex.
And.
Back me given 800 million dollars an my business plan is let’s go public, let’s acquire a company in this space in the electrical vehicle space in the technology space in the AI space, whatever it is. And then investors go, public company goes public through investors through an IPO process.
But there’s no company.
Just right there I thought I was with you every step of the way and then you said they go public but there’s no company. What do you mean by that? Oh, they haven’t yet purchased the company that has the electric vehicles or the.
It’s formulated and funded Specifically for the purpose of acquiring a company they aren’t yet an operating company.
Nicely leveraging the.
Experience of management team and the capital to then go find a company to acquire and in doing so in finding the company to acquire an acquiring their company. That company becomes public ice basically because they’re distributing shares in the public company to the shareholders in the private company or swapping them.
So now the private company shareholders have shares in the public company and the public company is in that operating business.
A moment ago, you said that doing an IPO is a lengthy and painful process.
Am I correct in saying that one of the advantages of this pack is that it doesn’t take so long to execute the merger and so forth and begin trading shares?
Absolutely right. The company can look at the management team. The company wishing to become public and say yeah, I want to be in partnership with these guys.
I want you know that capital to to do whatever I need to do to advance my plan. But yeah, that can be done relatively very quickly relative to an IPO process. An with much more certainty because you’re already public. You know if you worry about the IP and getting pulled, you don’t have to worry about, you might get a raise the money I want to raise the money.
Or anything like raised, so there’s a tremendous amount of certainty. Now there’s its own challenges. Go through this back process, but it is a a cleaner, faster way to go public. If everything lines up.
And I would like to speak to those challenges in just a minute ’cause I really want us to give both the potential upside and potential downsides for each of these choices. But I want to speak to the example of Nikola or Nikola depending on who you’re speaking with, which is the company that’s competing with Tesla. And it’s recently been in the news quite a bit, both because of their.
Process going public through a SPAC and also there was a lot of controversy that had to do with their founder and some of their promotional stuff.
We could talk about that for a long time, but I’d rather talk about their process of going public. Do you know much about the nitty gritty of that particular transaction?
You know the highlights. The EV business, electrical vehicle businesses, when it particularly hot space since PAX this year, there’s been 160 SPACs submission this year. 160 companies gone public with no business yet looking at targets, so there’s a tremendous amount of competition for great businesses.
And they’ve because of that. They’ve kind of gone.
Earlier and earlier and.
More risky and the companies are requiring and sort of following the hot sun sector. The Hawks, you know space so that once the transaction is consummated, the stock performs right. ’cause in the end the management team to raise the money.
Without a company yet.
You know they did it because they wanted shares in a company that performed this. They want to start performing what their share should be worth more, and so the Nicola deal was, you know, a bellwether deal in last several months and it rocked. I mean, it was way up now it’s come all the way back down to like an 8 billion dollar market cap. At one point it was in the.
And like the 30s I think. Or something like that. And then the CEO got in some trouble and that’s what happens when you’re public. And now there’s 100% transparent.
Right?
That’s what’s going on, and it’s been in the family.
Yeah, that’s a perfect example, isn’t it? Of the difference, you know that shine China daylight on you and there’s nowhere to hide?
Now let’s say, well, let me ask you. Would this normally occur? This type of courtship, where the SPAC approaches the company that has the great business plan. Or would a company try to shop itself to SPACs.
Both. We have a Bridgewater. We have a company right now with the flat out. What they want to find this fact reSPACts of all shapes and sizes. Billion dollars facts, there’s there’s $20,000,000 packs, you know that it raised just $20,000,000. Let’s say looking for the right business to merge with and so you can have it go either way.
The you know this is sort of we’ll get to the reverse mergers in a minute, but the into the SPACs for the new sort of Unicorn that I don’t want to Unicorn in our business, ’cause it has a different meaning. But for the new.
Sort of, you know?
An unattainable goal of this company I see. Yeah, because there’s so many of them out there looking for businesses to merge with.
Interesting and so. Let’s say that I was the, you know, I had some intellectual property. Perhaps I had a.
Operating business, maybe even recurring profit, but I would like to go public so that we can scale and do this and that what? What sort of things will a SPAC find appealing? What can I do to help position my company to be more attractive to a SPAC?
It’s the same thing.
With going public, you know you really need a story that lends itself to being.
It publicly traded, which is a big upside, right? You know, to be hey, we’re going to be the best dry cleaner on the planet. That’s why you want to invest in us and we’re going to grow because we’re the best. No, it’s no offense to dry cleaners, but that is not the kind of story this you know either IPO dollars.
Or a SPAC merger candidate. They’re looking for big bets. You know the Nicholas thing, Nikola thing, you know, EV trucks with companies like Amazon and all these you know major players in the market looking to electrify their fleet. That becomes a super hot space. That’s where investors want to be. They want to be in the Super hot spaces and.
You know that the all you can do is you need to shore up your management team and you need to really refine their narrative as to why you are a big upside investment opportunity for the current shareholders of that.
And you know, you just reminded me of something that I learned when you and I were in charge of a public company.
Real Businesses vs. Investable Businesses
Which is that there seems to be a divergence or there can be a divergence between what I would call a real business and a business that somebody would like to invest in. I remember in particular, making an investment presentation to a guy who had never managed investment capital before, but he had 125 million dollars to invest.
And I was only asking him for 5 million and he told me, well, you know, I don’t. I how about if I give you 15 million can you take this company?
Nationwide, in the next 180 days with $15,000,000, I said, certainly not. The guy says, well, I don’t think we have anything further to talk about, and So what it was, he just wanted to minimize the number of deals that he would have to manage, and they would look, they figured. Obviously I should have said to the guy. Oh, of course I can do that. You know, when we where do we?
Sign the check, but in any event, the point I’m driving at is that sometimes what makes you saleable to aspach or the investment market.
Is not necessarily that you’re, let’s say, a dry cleaner. They’ve got great cash flow. It’s primarily a cash business. If you had thousands of locations, God only knows what sort of revenue and profits you might generate, but that is more of a real brick and mortar business that is not of as much interest to the capital markets.
Are there other types of businesses beyond, let’s say, a electric vehicle or that kind of thing that is particularly sexy right now that might go down in flames and.
Everybody loses millions of dollars but would be attractive to SPACs and IPO’s and so forth right now.
Well, I don’t want to get it. They make it sound like brick and mortar businesses are, you know, potentially public companies. I think scale is important, just thousands of location. That’s it’s a little bit of a different story and there’s a role of light. Years ago there was a guy called the Rollup King Jonathan Ledecky.
You know half a dozen rollups? USA Floral USA.
Office products where you know his none of them ended up doing fantastic but for a while they did where his whole pitch would. We’re going to consolidate thousands of locations in these very sort of, you know.
Boring spaces mm-hmm and we’re going to ring efficiencies out of that scale, and they went public in a wildly successful for awhile, and then it kind of, you know, collapsing under its own weight, but so you can.
Walmart is brick and mortar business. It’s one of the most successful stocks of all time, so it can, but more and more these days investors are looking for, you know, real innovation. Really innovative, IP protected kinds of opportunities for investment, and there’s even in any of ’em there’s going to be.
Only a crash and burns right exactly right.
I mean, yeah, people remember.
In the 20s or 30s there were 150 hundred 37 different automakers.
Only three will you know so recently, and there’s plenty of those businesses out there now. With so many players and some we’re not going to win.
Let’s move on now to reverse mergers and talk more about that and justice. We’ve kind of been talking around it. Steve and I were partners in a company duringthe.com era that we were looking to go IPO, or perhaps be acquired by a larger company.
And This is why I you know at one point in my career I was the chairman of the Board and CEO of a public company and my God who would have ever believed it and that didn’t go so well for us. And so we both want to make that clear. I we each have different ways of expressing and the way I put it is.
We all know that you learn best by your mistakes and that’s how I became an expert and this was I don’t know, 20 some odd years ago I’m not.
Longer was it. Yeah yeah. So it’s been awhile and we took our lumps and and learned a lot and move forward. But the way that we became public was through a reverse merger. So would you explain how a reverse merger differs from a SPAC and why it can be a little more dicey.
Yeah, so in fact is a type of reverse version. All reverse merger means is that the company being a.
Wired is really the tail wagging the dog. That is the the operating business that is to go forward story. It’s the company getting acquired into the public vehicle that is the where the real value is and in in this in case in fact they’ve Specifically set out the creating public vehicle with cash.
In it big difference.
Resources to fund the acquisition and or expansion of the target company are averse.
Merger typically is a company that had already gone public.
Well, with a different business plan, you know 10 years ago, 20 years ago, 30 years ago where it has failed and all that’s left is the public. You know, infrastructure, the public shell of a company where the Mail is kept up, their public reporting with the SEC.
Or kept, you know, the various things you have to do with transfer age.
In some and and you know.
Just shareholder management and stuff to keep it intact and that in itself because it’s public and it has a trading symbol, becomes can be valuable to a company wanting to go public ’cause you have to have a certain number of shareholders for the exchanges to agree to let you trade.
On NASDAQ or over the counter or whatever. And so if you have a shell that already has that number of shareholders, then that is valuable. You should be much more valuable for reasons I.
We’re going to now, but Even so, to this day, every day there’s a reverse merger happening where there’s some defunct public company out there with the stock symbol. It’s trading at one 100th of a penny or whatever, and has 100 million shares outstanding, and they find their company that they like the technology they like the story, whatever. And that company, for its own reasons, wants to be a publicly traded company.
And they merge and the you know, the predecessor company. The public company might issue a billion.
Shares of stock company that’s got 100 million, Ouch shares outstanding now so that the company being acquired actually 98% of the post-merger transaction.
And so then their idea going forward is dear investment community.
Here we have this company that’s an operating company that’s turning profits and just needs to scale. And by the way, they are already public so that.
You will have a liquid market or more liquid market for the investment that you put in. You’d be more easily able to get it back at whatever point you’d like. Is that correct? Or is what? Why would the investment community like this story?
That is the pitch.
Reality is often considerably different, and your as I mentioned earlier, is that there’s a lot of sharks in these waters, right? There’s 14,000 publicly traded.
At least 10,000 of them are microcap companies. Thousands of those are shells just hollowed out publicly traded nothings and promoters get ahold. Of these shells and they look for suspects, prospects and ultimately merger partners. And there are some good guys, I mean Bridgewater ourselves.
Had participated in probably 25 reverse mergers over the years, either as an investor or as the poor guys who invested in the company.
That went bankrupt because of the structure of our deal took over the publicly traded vehicle and then look for a company. In fact, one of those publicly traded vehicles that we controlled and took, you know to the market looking for a merger acquisition. We found that I think was the very first Chinese biotech company that was traded in the United States.
We acquired that company and it ended up trading New York Stock Exchange and that was wildly successful. However, they didn’t pay for it, but they don’t usually workout that way because these things don’t trade.
They are not liquid. The promise to both the Entrepreneur of the company and the founder of the company being acquired and to investors were trying to get interested in that merge story is that oh once, your public you know you stock symbol is there. This price is there so much easier to raise money. It’s so much easier to get people to invest in your company.
And that oftentimes proves not to be the case. It is a huge, heavy, burdensome, difficult pain.
For how many adjectives that?
Lift to get a stock from that point to real. Relevant as a publicly traded company.
And in all fairness to you and I, I mean a big problem that happened with us is OK. Now we’ve got the story we were public with this or that, an it was the whole.com thing was collapsing upon itself, and then 911 occurred and that really changed the features and.
Face of the market San made it very difficult for us to raise money.
Alright, and one of the one of the things that just kills companies is that rule number one in running a company don’t run out of money.
Don’t do well. I remember 1.
01 out of money oh.
Yeah, no kidding.
Who and what had you become public? You are now completely at the mercy of your stock price.
And because these companies tend to trade very lightly, you know with very little volume, the smallest amount, relatively speaking, is float out of selling.
Of your stock, when there’s an imbalance of sellers versus buyers, can drive your stock down. Let’s say you did a transaction in post-merger. The stock was at $3 or whatever you know. I’m sure a small amount of selling can drive that stock down to $0.50 and in 27 and then five cents. And if you don’t have a real plan to get that.
A story out, broadly fast and with real support.
Telling that story piece of the stock trading and buying and building a shareholder base, it can be very painful for you simply can’t raise money you can’t because the stock is, you know basically has little to no value.
We’ll see we’re just about out of time. I always like to ask what somebody’s watching somebody’s listing their interested in spite of all those horror stories and caveats they’ve heard. They still want to learn more about it outside of.
Reaching out to you, what would you say is the best next step for somebody to take to keep moving forward?
Well, let me first say that it isn’t all doom and gloom. There is a path to navigate and it can be done successfully. And if your company is the right kind of company for a public publicly traded story, the rewards can be great for shareholders. For you, access to capital, realizing your dream, executing your vision.
What?
Perhaps there’s some businesses where you have suppliers that want transparency of you being public. There’s some businesses where you’re going to be able to attract the best talent because your public have shares to offer or.
Stuff that’s a good point.
You can get it done, but to your question Frank, the step is to talk to somebody, right? Anybody like me, anybody then have to be, but anybody who has the real capital market experience who has the scars to prove it.
Frank’s the one school for.
One day a week movie.
I’ve got 100 scars which.
Led me to write my book.
But talk to somebody about it and you know fluid you certainly happy. I’m happy to talk to anybody, anyone here listeners. Frank who has an interest in finding out more.
About that well, and then what would be the best way for them to reach out to you to connect?
Best way to reach me just through LinkedIn. I was an early adopter and I do a lot of my business there and I’m checking it all the time and so that’s a good place to start with me.
Alright, an if you’re listening or watching I will have a link a link to Steve’s a LinkedIn profile available for you to access. Steve, I appreciate you sharing so much wisdom with us today. Thanks so much for joining me.
Thank you so much for having me Frank.
Thanks again to Steve Kann and thank you for joining us until next time I’m Frank Felker, saying I’ll see you on the radio.
For giving your entrepreneurial sins with a gentle wave of his microphone, here’s Frank Felker.
