A few things to think about while reading this article. First, most of these tips are obvious. However, if I had a share of stock for every time I heard an officer or director of a public company express curiosity about their falling stock price and then went to check the company’s compliance with the tips herein and found the last press release from the company issued 1+ years ago and extensions of time filed for the last three periodic reports, I’d have a very large stock portfolio. Second, none of these tips are meant or should lead to any illegal or “pump and dump” activities or advocate anything but absolute honesty in all filings and posted materials to the public. The goal here is a strong stock price reflective of the company’s operations and its financial position, not some objective “good” stock price that is not an accurate stock price for the company. Third, there are many more things that will impact your stock price that are out of your control than are within your control. Although difficult, learn to worry about the things you can control and let go of the things you can’t control. The overall market and the performance of your market segment will likely impact your stock price more than your company’s performance.
1. Concentrate on your business. This is crucial. Too many officers of company’s worry about their stock price as much as their core business. Admittedly, it can be difficult to concentrate on business when disgruntled investors are constantly calling regarding a falling stock price. However, with so many things affecting your stock price that are out of your control, concentrating on growing your business and improving your profitability are things that will eventually have a positive impact on your stock price. If you concentrate on your business and follow the other tips contained herein, the market should eventually notice your company and affect its stock price accordingly.
2. File accurate reports. If you are reading this article your company is a public company and hopefully one that is filing regular reports as either a ’34 Act reporting company or a Pink Sheets current public information company. In either case filing periodic reports (10-Qs and 10-Ks) and current reports (8-Ks) that are accurate is essential. Few things engender less confidence in a company than one that has to restate its final statements and/or file corrective filings. To shareholders and prospective shareholders this portrays a failure by management to properly oversee their company’s filings. [As an aside, if you are non-current public information company trading on the Pink Sheets you need to seriously consider becoming a current public information company under the Pink Sheets or a ’34 Act reporting company. Taking these steps for your company will likely increase your stock price more than any other tip herein.]
3. File timely reports. Filing reports timely and not having to file for an extension or get an “E” on a company’s stock symbol shows organization and forethought to properly prepare for upcoming filings and carries a perception of proper management when it comes to the company’s business. However, while this tip is important, it follows “file accurate reports” for a good reason. When given the choice between an accurate report and a timely report, there is no choice. Companies should always choose to file accurate filings, even if they are filed late, over inaccurate reports filed timely. Any time a company has inaccurate information in its filings, and especially when the company’s management is aware the filings are inaccurate, the company and its officers and directors are at risk for much more serious issues from its shareholders and investors than a falling stock price. For this reason speed should never be chosen over accuracy. Ideally, a company should have both speed and accuracy, but when that isn’t possible accuracy should trump speed every time. Although this seems obvious I get asked if companies should just file a periodic report management knows is incorrect in order to file it timely more than is comfortable. Obviously, my answer is the same every time – wait and file an accurate report no matter how long it takes.
4. Hire a good, reputable IR/PR firm. The purpose of an investor relations/public relations firm is to accurately relay information about the company to the public and to ensure that information is being disseminated through the proper channels. No IR/PR firm should be hired based on any assurance of what they can do for your stock price. Their job is to properly communicate with your shareholders and potential shareholders and bring attention to your company through accurate, timely disclosure.
5. Communicate with your shareholders regularly. Regardless of whether you hire an IR/PR firm, you need to have regular communications with your shareholders. Above all, these communications need to be accurate. They should also be regular. This isn’t to say the company should create news when there isn’t any, but many companies fail to properly capitalize on good news about new contracts or good financial results. If nothing else, a company should issue an open letter to shareholders from the company’s management on a regular basis to let the shareholders know how the company is doing and about its future plans. While much of this material should be covered in a company’s annual or quarterly management discussion and analysis (MD&A) section, this information tends to get lost in the filing due to all the other requirements of the filing. A good, well-written, accurate letter to shareholders will many times help shareholders focus on what is being said by the company about its current state and its future plans, than disclosure in a company’s annual or quarterly reports. All press releases should be reviewed by legal counsel to ensure all legal requirements are met and there isn’t unsubstantiated “fluff” in the press releases.
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The Lebrecht Group, APLC provides comprehensive advice on a variety of corporate and securities law matters. Please contact us if you have any questions.
Craig V. Butler, Esq. is an attorney with The Lebrecht Group, APLC, located in Irvine, California and Salt Lake City, Utah. He can be reached at (949) 635-1240 or via e-mail at firstname.lastname@example.org with questions or comments. Please visit our website at www.thelebrechtgroup.com for future updates and other information.