Bill Kaitz, CEO & Founder of Promethean Marketing, has been in investor relations marketing for nearly 20 years.
Promethean Marketing specializes in longer-term & longer lasting investor relations marketing campaigns for public companies interested in build a broad investor base.
He emphasizes the difference between what is commonly thought of as “stock promotion “campaigns vs. shareholder acquisition strategies. While all marketing of a public company security falls under the regulations regarding stock promotion there are fundamentally different approaches to leveraging marketing to attract shareholders.
That difference is the central issue in our conversation.
Bill has a lot of experience across close to two-decades and managing somewhere north of $100 million in investor relations ad spend across both digital and direct mail channels.
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John Newtson: 0:02
All right, hey everyone, I’m here today with Bill Kaitz, who’s the CEO and founder of Promethean Marketing. Bill’s been in the investor relations marketing industry for I think 20 years or so, managed easily over 100 million probably much more than that. But, he’s told me, I don’t really keep track, so I don’t want to overstate it. And what’s different about Bill’s approach to investor relations marketing is he pretty much specializes in running longer term and longer-lasting campaigns. So, Bill, thanks for being here. Thanks, john, I’m happy to be here. Yeah, it’s great. What I really was really excited about this conversation. The reason I was really excited about this conversation is you have a very clear distinction between what is stock promotion and what is shareholder acquisition, and I think it’s a really important line to draw. And I know there’s from a regulatory standpoint it’s the same thing, but from an issuer standpoint, from an investor standpoint, there are very different things in the way that I kind of understood what you’re saying.
Bill Kaitz: 1:02
So, I think, let’s start there.
John Newtson: 1:04
How would you define the two things differently?
Bill Kaitz: 1:09
Thanks, John. I think it’s always important in any business to distinguish, to differentiate between strategy and tactics.
So, in my experience in stock promotion and that’s where I got my start so I’m very familiar with the tactics around stock promotion. But my experience was stock promotion as defined by Securities Law 101 is the dissemination of information about a public company to increase its stock price and trading volume. And I think that’s pretty in line with what everybody considers stock promotion to be, and we experienced a paradigm shift in that thinking a little over a decade ago. And our definition of this now is the dissemination of information about a public company to increase its audience of investors as part of a larger strategy.
And the reason for that is we noticed it was extremely difficult on a sustainable or repeatable basis to generate increased trading volume. We had some really largely successful campaigns, and we had some very unsuccessful campaigns. You can’t really build a business on temporary solutions or inconsistent solutions. So, I really drilled down and to say what works every time and the only things I could come up with for trading volume is that trading volume is always a byproduct of having a large number of shareholders. Every client of mine that had a large number of shareholders inherently had organic volume every single day without spending any money. So when you added media or promotion to that, it was amplified. The clients of mine that were new issues or had very little shareholders, it was a grind or very difficult and hard to predict the outcomes. So when we looked at that it was really just a simple matter saying, ok, well, if the goal is trading volume and we know for sure that it increased shareholders, achieve that end. How do we then turn this, shift our focus, and to say how can we acquire shareholders?
John Newtson: 3:25
Yeah, so the way I think of it has been because I’ve seen and been involved in different things and talked to a lot of people in the stock promotion, investor relations world, with different approaches, both on the client side and then the agency side, and it seemed to me the. It’s almost like the difference between farming and hunting. Stock promotion is like I’m going to go out and I’m going to kill a cow today, I’m going to spend this amount of money and what I need is I need a cow and I need it right now, and I don’t need to worry about what I’m going to do next week. I’ll figure that out then, and so what you end up with is these campaigns that are, I think, kind of the in their most extreme form.
I would say probably the most problematic type of campaign, right, where you have somebody who’s going to drop a very large amount of money there’s even seven figures in the course of a week or two and just trying blast it out there, get something in front of as many people as possible, and they work or don’t work, which is even crazier to me, right, because it won’t work even and so the money either is gone and maybe they get some, a bunch of investors in or, worse, a bunch of traders because it’s just really tight.
All of a sudden, this stock is everywhere and a bunch of traders are trading it and a week goes by, two weeks go by, the spend goes away. You don’t have loyal shareholders, you have people who are just kind of impulse buyers.
I think you described it to me one time that, and that’s very, very different than reaching out to investors and saying here’s our story. We’re going to talk to, we’re going to try and target qualified folks over time, get them engaged with a company before we try and just drive volume.
We’re actually trying to drive volume. You’re trying to build investor not just awareness, but get them to actually actively outreach to the company and engage with the company before you even worry about investing Right, is that about right?
Bill Kaitz: 5:34
Yeah. So when you look back and see just a minor strategy shift in the beginning you know the stock promotion because it’s to increase trading volume or price.
You know, 15 years ago when I used to rent media for stock promotions, it was always who could, who could the list that could the most consistently generate trading volume on the day that they were advertising. And it’s really when you think about that, you’re not who impulse buys a stock, it’s not a, it’s not chewing gum or a candy bar or a magazine in a cereal or in a checkout aisle.
So you know, looking back at that, that was really kind of backwards because if you’re advertising on the basis that we know this list could create impulse buyers of a stock the same people who impulse buy a stock or the same people who will impulse sell a stock either when they see profit or when it turns against them. So you know that doesn’t actually do anything to help an issuer grow to blue chip or whatever their end goal is.
So for us it was well. This doesn’t make any sense. What do investors actually do? And I’ll spare you the boring details, but I set out. I did online trading academy. I went to in live in-person trainings. I spent a lot of money to be with the people who were actively paying for trader and investor education and I just started listening to them. And you know, the first step anybody’s going to do is validate their research and the first thing anybody wants in any story is interest or intrigue. That sounds interesting to me and it became obvious that what we have to measure is interest, and the only way to measure interest is attention or engagement. It becomes similar to content marketing, but really what you’re trying to do is create a compelling story and walk these investors along the route, and I mean this takes on many forms, from copy to media.
But one of the most noticeable difference between stop promotion and a shareholder acquisition campaign, I would run first, is always in our media selection. Stock promotion will lend itself to media sources, lists, advertisements that they think, and advertising sources that they think will generate buying the day of. That’s their only unit of measurement, and we find we have a mantra really we don’t spend today for today, we spend today for next week or next month. That’s like you said. This is about farming.
Everything boils to, everything is based on a tipping point-based system and what we’ve seen is investor attention has a half-life. We can send an advertisement to an investor and although we’re not following this person around, I can’t speak to whether it’s 30 days or 90 days, but historically what we’ve seen is, once you built to a certain number of audience, it’s a bit of a catalyst where we start seeing engagement and retention increase.
So it can begin to snowball at that point. In my experience, it’s usually around for a new issue. It’s usually around two to three months at 3,500 page views a day. So you can do the rough math. I’m not going to pull out a calculator for the point of this call, but once we’ve kind of reached that 100,000 pre-qualified investor realm, that’s when my clients typically start seeing a bit more activity in their markets or phone lines reading more. And what we’ve seen is it’s not just we’re not measuring the trading volume the day that we’re advertising.
We’re looking at other metrics such as how long are people reading the content that we’re putting there and what sort of secondary, third or fourth touch point are these investors engaged with? Whether it’s email list, calling the IR online or what we have, one of the first indications is always a huge boost in traffic on the IR portal or the corporate site of the company.
John Newtson: 9:42
I like that. So, down in the brass tacks, the metrics that you’re measuring in the campaign don’t start with volume. They start with attention, which is all.
Digital marketing is essentially an arbitrage on attention, and so I know from the subscription newsletter publishing world that when we have a talk to a guy who he spent $5 million on subscription publishing acquisition campaigns and he found that they liked a long form ads and the reason they liked it is they were trying to get people who were really engaged with the markets, who were reading newsletters, who were really looking at things, and if they used videos they could still get the same front end attention, but they didn’t translate into back end behavior the same way because they were just because video is one it’s passes but to their product wasn’t a video product and so they wanted the investors who were readers, and if they could get the attention of a reader and they would put you know, read the page, they’d have to click to get to the next page and then they could have a chance to buy.
They found that, those customers paid out much better and there’s other elements involved in that in terms of media strategy and different. That click to the next page thing is something that has worked at different times and doesn’t always work, but it was really interesting to me because it’s kind of the same thing that you’re talking about.
It’s not just to somebody clicking, move through a bunch of actions. If you’re looking at the second sale in a newsletter business, the guy who’s reading everything and looking at it and paying attention, he’s much more likely to be worth much more than somebody who’s just kind of that impulse like, oh, I’m going to just do this right now. And so it’s interesting to me how these different types of investor marketing campaigns have so many parallels when you get down into the brass tacks of what works here versus there.
Bill Kaitz: 11:42
That brings up an interesting point I have based my first eight or nine years in the business was all capital markets experience. I started out talking to brokers on the phone pitching them penny stocks, which was a fruitless effort maybe a conversation for another day. It wasn’t until I discovered direct response marketing. I received a mailer I don’t know how many years ago 14, 15 years ago and I bred the disclaimer number and I saw four or $5 million on this mailer and I was just completely enamored by it.
I wasn’t really exposed to direct response marketing before that, so I started digging in and I just started calling everybody I possibly could, signing up for every financial newsletter, which ultimately led me to talk to some of the greats of direct response. And it doesn’t matter whether it’s financial or health or anything long copy always builds a better quality, long-term relationship and better lifetime value. You can’t.
You got to think of these things like building a relationship. You never walk up to a pretty woman or a pretty guy and say, hey, you’re pretty, let’s get married. You know, like it doesn’t, that doesn’t happen. You have to start with an engaging conversation. There has to be some interest. You have to get to know each other. There’s. You have to build a relationship and trust in order to have a long, lasting relationship. And the same is true in any marketing effort, be it for investors or shareholders or customers. So we’ve always used long form copy in our direct mail efforts. You know, we’ve never done any less than 16 pages in direct mail and we’ve done as many as 26. And what we’ve found, just like what you’re saying is you know we’ve done direct mail campaigns and seen names that were in the direct mail file that were still there seven, eight months or, you know, a year or two later. We can only track that in direct mail.
But you know, I just read an article from the NYSE that stated the average hold time for New York Stock Exchange stocks is five and a half months. So you know, if we can, if we can see long form copy lead to an investor for seven months, 12 months or 24 months, you know there’s proof in the pudding on long copy.
John Newtson: 14:15
Yeah, that’s what I think Well, just, it’s that thing of buy in, of like. I feel like if you take the time to read a report on a company, you take the time to research the company, you don’t you’re not an impulse buyer. You see that company again and you go back to it and it’s a decision, it’s a more measured decision, like.
There’s that thing of commitment and consistency where somebody’s like I thought this was a good idea.
That is more psychologically, you’re more invested, because now when you sell, it’s like what was wrong, which is hard emotionally. But also you have somebody who maybe understands the company a little bit better, is more willing to kind of like whether a bad press release, because they believe or understand where the company is going and they understand where that piece of news fits within that larger context maybe, or I don’t know, I mean the, the, the, the attention that you can get.
It was interesting when you made that comparison of just like volume versus attention, because when I went down that line of thinking, I realized that we do that in publishing quite a bit and there’s a very different customer who buys on one type of promo versus another.
Right, there’s like the get-rich-quick guy who has no loyalty whatsoever. He’s kind of like he’s in, he’s out, he’s impulse buying, he’s, you know. And then you have somebody who has money, who is trying to, you know, preserve it and grow it, and they buy very differently and they and they stay much longer. And so that, to me, was an interesting distinction that you’ve made.
It’s a very fundamental one, and maybe we’re belaboring a little bit much for somebody who isn’t, as is kind of in the direct marketing, as I think both of us are, but for an issuer who doesn’t, who isn’t a marketing guy, direct marketing guy, I feel like you can’t overemphasize that point enough.
What do you say to an issuer when they come in and they say, hey, look, we just we went trading volume right now this is what we do Like they’re after the traditional stock promotion thing.
How do you talk to that guy in general?
Bill Kaitz: 16:26
It’s one of the biggest conversations I have to have with my clients, because what we provide is not instant gratification. There are some built-in protections for us in that if, if what you have doesn’t add up to what we, the story we tell the, the solution won’t be effective, because we’re talking to, you know, seasoned investors who can read between the lines. They’re not risk averse. They definitely are under. They understand the risk that they’re taking. But the conversation is the most common conversation.
Everybody is trained to look for instant gratification, meaning I agreed to spend, you know, a hundred grand a month with you. If I don’t see my stock trading tomorrow, they get justifiably scared, right, and it’s just really. It’s more focus on on an audience.
So what I say to them is you know, ultimately you have to refocus on what is it we’re trying to accomplish here, right Like? Trading volume is not like. No CEO wakes up in the morning and says I need trading volume today or, you know, would make my life a lot better is trading volume? It’s always a byproduct of something else.
They, you’re a public company, because you needed to leverage the market for your equities for growth, and if you’re not leveraging your market for growth, then you’re wasting money, right, like the reporting requirements and listing requirements and listing fees.
It’s very expensive to be public, so we are always a byproduct of that. If they could raise capital without trading volume or acquire companies without you know, over-deluding themselves, they’d never hire me. What trading volume allows for a small cap company is options. It de-risks money, it de-risks acquisitions.
You know the the most of the value. Trading volume isn’t the only, it’s not one thing, it’s everything to a small cap company. So what I explained to them is you know, how long do you plan on being a public company? Because if you only plan on being a public company for two weeks, then let’s just blow this thing out.
But if you plan on being a public company for longer than two weeks, what we have to do is build you an audience, and and having an audience of people is far is far more valuable to you than having temporary trading volume. Because for every great thing that you do, you need you need an audience. Right, and we’ve all been in audiences. When you have 20 people in an audience, clapping is kind of, you know, lazy and disheartened, but if you have an audience of 2,000 people, that that you know.
That’s when you start seeing standing ovations and you start really evoking emotion. It’s a much more visceral response at that point. So, you know, the best thing that I can tell people is you know, building a business takes time and building an audience for that business takes time. So what we, what we have to do, is refocus. So it’s not really more of a conversation, it’s a refocus to our clients on their audience growth. Because I’ve never met not a single time have I ever met a CEO, cfo or capital markets director that hasn’t believed and said wholeheartedly, if you just put me in a room with the right people, I know I can get people to invest. 99% of their complaints are they’re not talking to the right people, they’re in a a non-deal roadshow full of plate liquor. So for what we do, as you know, in direct response, we craft our ad, our ads, our tar, our media targeting our ads, our call to action, everything, every little tiny nuance in the copy, is designed to not only pre-qualify but, you know, create a pre-interested and pre-motivated audience. It’s entirely up to them, as the issuer, to convert that audience into a shareholder based on their execution. Excuse me, but what I would ultimately tell somebody is looking at a stock promotion versus a shareholder acquisition campaign.
If you’ve not done one a very expensive stock promotion campaign then be wary, because think about it logically If you can send an ad tomorrow and generate trading volume, what’s the quality of that person that will buy a stock in a day?
How bought in are they at the end of the day? If you have done this, if you’re an issuer who has and you’ve experienced this where, yeah, I spent $250,000 or $100,000, and it was just a flash in the pan. My stock went up for a day or two and it came back down and I’m sitting here no better off than I was the last and I’ll leave it with.
You also have to be careful of potential damage. There’s the mob theory. If you’ve done a successful, a very successful campaign. I’ve seen this in low float issuers where they’ve actually done a stock promotion campaign and wound up with less shareholders after the fact because their stock ran on a low float, peaked out of the top, you saw some profit taking and the thing went on a free fall and it scared other shareholders and they’ve wound up month over month with less shareholders than they started with. That’s terrible.
John Newtson: 21:51
I guess someone who’s listening could also be thinking here. Having dealt with people who are advertisers initially were so many times over the years, I can almost hear there’s a certain group of people right now who are thinking well, if you’re not looking at trading volume, you’re talking about attention, then there’s going to be a certain group of people who are going to think that that means that there’s not a measurable return on investment. There is a measurable return on investment.
You have quite some pretty specific numbers here about what you can expect over time on your spend. I’d love you to share what those are, because I think that’s an important thing for someone to understand. Is that because we’re talking about attention does not mean that this is brand advertising? It does not mean that this is simply like you put the money out there, spray and pray and hope something works. There is a science to this. There’s math to this. This is something that’s repeatable. Would you lay that out? What’s the math supposed to look like to an issuer when they have a successful shareholder acquisition campaign?
Bill Kaitz: 22:56
Yeah, I can speak to a number of numbers. I’d say the first thing in the disclaimer language is going to be my company has only ever provided the shareholder outreach, like the investor awareness, the top of the funnel. We build audiences for good companies. The clients that we work with know how to leverage and that’s really the key element here is shareholder acquisition campaign is a longer term strategy.
On average, I think my clients have worked with me around 1.9 years, so it’s maybe 15 to 18 months On average. I’ve had clients work with me as long as seven years, but our clients have seen numbers like this because they’re actively leveraging the audience in the market that we’ve helped them to build.
I’ll do a shameless plug. It’s not my book, but if you’re a small cap CEO, you should definitely have a copy of the Perfect Corporate Board by Adam Epstein. It’s about the only handbook that exists for small cap CEOs to navigate the capital markets.
With that said, we chose direct response marketing because in a small cap world, you have much less margin for error. If you’re Apple or Microsoft, you can afford to make some mistakes, you can afford to spend some money and it’s not really going to change your course. But to a small cap business to waste six figures any about six figures. It could be disastrous and the stakes are just much higher. So just for the last four years, in my last 19 clients alone, on average they’ve seen a 4,000 percent increase in trading volume, which is cool, but ultimately that alone doesn’t get you anywhere.
So we had to measure net cash from financing activities because that’s what really matters. At the end of the day, we’re a function to help companies raise capital. We saw 550 percent in. Our clients saw a 550 percent increase in net cash from financing activities during and after our campaigns than the previous year prior to engagement.
This is the metric that we really like is that basically breaks down to for every $1 in media they spent building an audience, they received $4.64 in net cash, all while their market caps increased by 115 percent. So they’re increasing their issued and outstanding through acquisitions, which we didn’t mention. They’re increasing it through new financings and warrants and their market caps are still increasing, usually because the companies that come to me are undervalued at the time of start.
But what’s really key there is that they’re working in their background and doing what they have to do while we build their audience. They’re leveraging, they’re executing. We’re reviewing and adjusting our strategy and with a shareholder acquisition campaign we have to work together with their capital markets teams in order to find the number that works for them, for their point of best available leverage. So we can almost over time, to the best of our ability within the confines of regulation, kind of create a dial. Now, these things still are advertising at the end of the day, so it’s not as easy as just pushing a button.
My clients don’t turn it up and turn it down weekly. We’re talking quarterly. We’re spending a fixed amount of money every single week based on the audience that we’re building. But if we set up our KPIs, the way that winds up looking is we say, based on our KPIs, this is the audience you’re building per week and based on what we’ve seen that work over the last quarter, that you can convert into shareholders, this is the number we recommend based on your needs. You have this many warrants or you want to affect this kind of a raise. You’re looking for this amount of trading volume. We can kind of work to that and make a little bit more of a dial or a lever that this company can pull, rather than how much do I spend to get trading volume right, like most of the time it’s how much does your program cost, as the conversations they’re having and it always throws my clients for a loop when it’s like what do you need to get done?
One last example before I stop on the subject.
One client came to me they’re having really good success. They converted something in the neighborhood of $9 million worth of warrants. They’ve increased their shareholder rates. They’ve been working with us for five or six months and we were just kind of planning the next few quarters out. They mentioned they were getting a grant from the government which was about $30 million and one of the stipulations was that they had to raise an equal amount of money, like the grant would only happen if they could match the grant.
So over the course of that conversation, I heard that they’d had something in the neighborhood of 20 million warrants they wanted to convert. Would be great if we could convert. Plus, we need to raise $30 million and it’s gonna take maybe a couple extra million to get through feasibility. It was a mining company. So I said well, it sounds to me like you’ve got to raise $50 million in order to get where you need to go.
So I would plan on roughly spending around $5 million in order to get to that point, which nobody likes to hear right. But we had to look at the farm, like you were saying. We don’t wanna wind up in a financial dust bowl in that analogy, and if you’re gonna be drawing down or diluting your market, then you have to continually sell that bright future and bring new investors to the table.
John Newtson: 29:13
Right, that makes a lot of sense. I think that’s like the goal instead of trading volume. Then what you’re talking about is how do you build that 10,000, 20,000 shareholder base for the company, and trading volume will be a natural consequence of that. And so, with that, what are the kind of goals that issuers have? Then you say that’s the kind of surprising question for a lot of them is that when you ask what’s your goal, are there buckets of, like most people are looking for X, y or Z, and you’re kind of working back from kind of the same handful of goals.
Bill Kaitz: 29:53
Yes, I mean, everybody leverages their market in their own way. Some companies are good on capital, but they want to leverage their market to acquire companies. At that point we need higher price points and better liquidity in order to have better negotiation terms with less dilution. There are buckets. I’d say it pretty much falls into the category of money buckets and acquisition buckets. I mean, there are many, many companies that aren’t public.
For those, they’re public for a variety of other reasons, such as employee compensation or for the purpose of our conversation. The buckets are almost always I have to raise this amount of money or we want to leverage our market for these acquisitions. There’s a few. The third bucket would be kind of like ancillary. It’s part of a larger strategy for buyouts or a larger strategy for their own personal net worth. At the end of the day, a lot of these founders, ceos and board members they’re heavily vested in these companies and they hate seeing something they know should be trading at much higher valuations, but that doesn’t really have any impact on our strategy. I’m not talking to board members or CEOs saying let’s increase your personal net worth. They’re just kind of ancillary benefits.
The biggest, though, is I’ve never met a CEO or a CFO that doesn’t know how much money they need. This is what our budget is to accomplish these goals and get us through to this next level. We always work backwards from that and then you have to work with companies who understand much like it says in the Perfect Corporate Board what the realistic landscape is. There’s a great example in this book that a biotech company trading $300,000 a day needs to raise $50 million, but realistically, based on its peers, maybe they’d be lucky to raise $24 million. But if they just increased their trading volume by $300,000, doubled it to $600,000, they could in effect raise $50 million.
They’re much more likely to raise $50 million at the same level of dilution. This boils down to the concept that, especially in the post-08 landscape, investment bankers aren’t really investors. They’re financiers. Their terms are very much related to the market and the liquidity denotes risk. As we know, risk dictates terms. You’re not going to get the lowest interest rate possible if you have a 600 credit score. Small cap CEOs looking at that.
We almost always base their market off of a shareholder count that we view is going to help them meet the needs of working with investment bankers and achieving a realistic capital raise. We don’t take the role of capital markets advisor. We’re just the arm that says this is what you want to invest in, building an audience that’s going to land you, more than likely, where you need to be Not quite as simple as the bucket I know you love buckets.
John Newtson: 33:13
No, I love buckets. There’s a grouping over here grouping over there things that I think about. No, that’s great, then just switching gears then, because it’s direct response, then the story is huge. How do you start that conversation? Obviously, that’s the tip of the spear. You can put the media out there, but the media has to carry a message.
How do you start that conversation?
Do you find most companies how dialed in do you think their stories tend to be for a retail audience? How much work has to go in to get to where the story is ready for show?
Bill Kaitz: 33:52
Our storytelling starts with our media source.
We’ve learned a long, long time ago that we focus all of our client’s money on the same sources that generate buyers of financial newsletters the third party advertisers that have the best affiliate lists, the same principles that they use for their network media spends. We’ve based everything off of people who buy financial media sources. As Mark Ford said recently, greed is really less than you think. I know people have seen short-term success with it, but really it’s an emotional connection and it’s an interest level.
Once we looked at that and we said, okay, well, how are financial newsletters generating buyers of financial newsletters? Because they’re the same audience. Right, these are people who are paying money to find unknown stocks and they’ve denoted they’re not risk averse. These are the exact same people we want to talk to. These are the ready to buy right now. Right, the 3% of the world that’s interested in your story.
Once we saw that, we really started emulating a lot of the same tactics. Big ideas work really well, but what we find when we’re lacking a big idea, that’s like a hell. Yeah, it’s a confirmation bias. Our initial story is really just an attention grab. It’s the equivalent of saying hey, if this interests you come into this room and if you said that into a large crowd, what’s going to be interesting to them?
One of our clients who’s got a lithium asset in the US. Their big idea was the Cold War with China gets hot. The reason for that is we learned through our research that among resource investors there was a big fear about China. There’s a lot of really good, substantial research that we could point to that shows China really is trying to gobble up the world’s lithium supply and how aggressively the United States is interested in its own domestic supply.
If we would have just started with, here’s a great lithium mining company in the US. It’s commoditized. It’s very boring. What we found with that campaign is that the attention initially was not only astounding but it gave people something to pay attention to.
That was their motivation to sit down and read a press release. That was their motivation to open an email from this company. That was the motivation.
We tapped into what they were already motivated with. Does that enter the conversation that’s already happening in the mind of your prospect, robert Collier? The story that we tell and this is oftentimes hard for CEOs to understand it isn’t hyperbole, it’s not factually inaccurate. It is a story. It has to be a story Stories. Typically they started a point of high drama. What we’ll typically do is we’ll take a signed fact sheet of material representations from the client and we’ll assign an author a financial author, because people love stories from people better than they love stories from nameless corporations. We’ll take a well-known financial author that tells the story of the future that this company is building. It’s always either a big idea or a confirmation bias. It’s one of the two. It’s only designed to start the conversation From there.
Follow-on conversations start connecting it to things like financials or leadership backgrounds or lessons learned. But you have to start the conversation somewhere. Every single one of our initial pieces follows that kind of schematic.
John Newtson: 37:41
Yeah. I think, that issue of proceeding in this hyperbole is better. The way I frame it to folks and I’m talking to them is this more about market context, sector context. Your story is happening within the context.
Your company’s story is happening with the context of a sector which the sector itself is happening with the context of a larger macroeconomic in some cases like lithium geo-political environment. What you’re really doing is using the context to grab the attention and then you’re going to drill that attention down into this specific story. It is like how did you go to China when you’re talking about my lithium mine? That’s not in China. It’s like well, if you understand the context that your investor, your potential investor, is living in, it makes perfect sense.
I think that story angle I love it because it is Every time I see a presentation from a company they’re talking very much about, especially if it’s a mining company. Okay, here’s the geology, right, like let’s talk about the geology. And I’m like nobody wants to talk about your geology until they understand why it matters right now and then it’s important.
But that’s like the rational sale way farther down before. I’m excited If I’m not gonna invest in lithium at all, I don’t care if your lithium mine is better than his, it doesn’t matter. You have to sell me on the sector before you can sell me on the company.
Bill Kaitz: 39:17
Well, it’s not really their fault either. I mean, there’s an old saying it’s hard to read the label when you’re inside the jar. When you’re talking to a guy or a woman who lives and breathes in board rooms with smart money and when I say smart money I mean bankers and professionals on talking, mbas, vcs the conversations that these leaders are having every single day are elevated conversations and they’re usually rough into the point.
If you’re a mining company and you’re gonna sit down with Rick Rule, the conversation that you’re gonna have is gonna be vastly different than the conversation you’re gonna have a John Q E-Trade. So where we’ve really come in handy for our clients as being a translator, as such right, we can translate the passion that they have to the audience that they’re talking to, and there’s no better way than I probably have done on this interview to get eyes glossed over and get somebody checking out and reviewing their grocery list than to say something they don’t understand. It’s a direct-response tenant. I always speak in direct response tenants, but a confused audience never buys right, and the best way to confuse an audience is talk about geophysics or talk about assay results, right, like.
Or if you’re a biotech company, you start talking about the science behind your and not the impact of your studies. Right. If you start with the science but not the impact, then you’re gonna lose people, because nobody likes feeling dumb and nobody’s as smart at what you do than what you. That you are Right, right.
John Newtson: 40:56
Yeah, I think that’s a good distinction to make, because it is very different to talk to someone who even a sophisticated investor in a sector versus somebody who’s a general sophisticated investor in a different sector. They don’t understand all of the different, like they don’t necessarily have the specific knowledge to take whatever piece of information you gave them and then lead it to the impact. So starting with the impact and then contextualizing it again is really good.
So with that, again, let me switch gears here, because when I’m talking to analysts in particular, I feel like analysts and investors who were not maybe, who were distance from the companies in general, not someone who’s active in an industry, but somebody who’s an outside investor and invested in an industry this whole idea of stock promotion, the whole idea of shareholder acquisition campaigns is somewhat dirty to them, right, and I think my view I’ve stated it many times over the course of a lot of conversations is that with the rise of media across the board, this is becoming like having a media strategy that can be more complex is kind of business, it’s standard business procedure now and it’s gonna become increasingly so.
It’s gonna become more and more important because if you don’t have a media strategy, no one’s gonna find you and if they can’t find you, they’re not gonna invest in your company.
I don’t care how good you are, somebody has to tell them about it. Nobody’s going out there. There’s very few people, I should say, who are going out there with a list of let’s look at this stock and then this one, and the sequential, orderly manner, to make sure that they look at every single stock. Those are professionals. Everybody else is just kind of like well, I heard about it from here. So how do you talk about this to people who might be resistant to the fundamental idea of stock promotion? Why is it so important to pubcos at this point?
Bill Kaitz: 43:00
Well, first off, I’d say I don’t blame them.
People who have a negative understanding, because there have been a lot of bad actors that have dominated this space for so long.
So, first off, I don’t blame you if you’re one of those that is averse to a stock promotion.
Secondly, I would just say that the advent of E-Trade in 1996 and the just exponential adoption of it ever since has completely changed the landscape that we’re in. This was a broker dominated landscape pre-1996.
If you wanted to buy an equity or sell an equity, you had to pick up the phone and process an order and you had a bit of a middleman, an educated person in the middle that could either tell you why you might be making a mistake or have some measure of influence.
So people pre-1996, and this was the tail end of my coming into the business they spent all their time courting brokers as it means, and professionals as it means to get the word out about their equity. And that’s most of the analysts that I’ve talked to that are averse to digital stock promotion come from that era because it used to really work.
There was a great study done by Grant Thornton and led by a guy named David Weald. The IPO crisis that followed the 2000s could be linked to E-Trade, in essence gutting the retail influence that brokers had. So, that being said, it’s always it goes without saying the adage of stocks are sold by having their stories widely told remains true today.
The difference is in the medium right. I mean, we all used to live by PBX phone system. We dialed nine to get outside. I have not seen one of those phones in five or 10 years.
So the same is true for reaching a retail audience. It’s always been true that small-cap stocks need a retail following in order to garner institutional investment, in order to garner analyst coverage. Analysts are paid based on, based on how well their analysis performs or the distribution and such, and they’re not gonna cover stocks that institutions can’t even buy right. So it is the first step. It’s not a chicken or an egg in my mind.
I will just say there’s a right way to do it and there’s meaning stock promotion.
There’s a right way to do it and there’s a wrong way to do it. When your goal is instantaneous trading volume and you’re gonna be measuring that based on how well it traded the day you advertised, it’s gonna affect your call to action.You’re gonna tell people in your article or your content to buy the stock now. You’re gonna use urgency and scarcity. You’re not gonna be building a relationship. You’re not gonna be talking to really good quality people.
So, yeah, I think they’re kind of right in not liking or being a big fan of that style of marketing or I think they could be dangerous as throwing the baby out with the bathwater. You should absolutely be very interested in companies who are willing to invest in themselves.
So I’m biased. I provide these services, but in my mind, a company that’s willing to pay for an intelligent, strategic, measurable shareholder acquisition campaign is only investing in themselves. My fees are minimal compared to what the client spends. So when a client spends money with me over 80%, 80% or more of what they spend on me, with me, is on their own media.
It’s their own advertising that builds an audience for them, not for me. Versus, if you’re paying some penny stock picking list, most of that money winds up in the pocket of that person. They might spend some money on leads, but it’s their audience that you’re paying access to. So if you’re paying for access to an audience that the issuer owns, you’re doing an ethical but interesting advertisement.
Then this only benefits everybody, because if these issuers have a better, stronger retail following, they warrant more analyst coverage. If they warrant more analyst coverage, it’s inevitable for institutional coverage as long as they execute right. I mean, we’re all basing this premise off of good people running good companies for the right reasons.
Where I’ll end on that is there’s a big difference in the world on management compensation. There are value creators and there are value consumers. So if I’m an analyst who’s previously anti-stock promotion, but if everything else about a company looks good and they’re investing in their retail outreach, then I’d say that’s a great company to follow, especially if management compensation is not based on raising money or selling stock. Those are the bad actors you want to stay away from not always bad actors, but you want your management to make money when the company succeeds, not just because they have the ability to sell stock, be it for capital or otherwise. But this is essentially, I guess, in a simple form, and the end of here is this is just the natural progression of retail outreach for today’s digital age.
Spending time going after retail brokers now is a waste of capital versus having a measurable campaign. Digitally is not only more efficient but responsible. To do the non-deal roadshows would have been 30 years ago.
John Newtson: 48:53
Yeah, I mean that’s like the E-trades of the world did democratize finance to a large degree.
It created an explosion of new investors, but at the same time the consequence of that then is that the existing infrastructure and established interests evaporated and there isn’t another, and because of that it’s like the flattening of the market, in a sense, between the issuer and the investor, and so now we’re in a world where direct to investor replaces brokerage worlds in a lot of ways, and if you don’t have a director investor plan, then you don’t have any benefit there and you’re just hoping that things will get better.
But I think that’s where, like it was Terry Lynch from, he’s helped with a bunch of companies, found a bunch of companies, public companies, who said to me one time he’s like you’ve got the business of the business, but then you got the business of the money, and if you’re only good at the business of the business and you’re not good at the business of the money, then all your investors get screwed because you’ll never be able to, you never be able to build enough momentum in the markets to get to where you can get analyst coverage, where you can get into that upper sphere of public companies that have.
If everybody started at $5 in their stock, which is like the minimum threshold for most funds to invest, then you’d have a different environment than you do. But the reality is is nobody starts at $5,well some people do, but small-cap, smaller companies who are trying to use capital markets need to find some way to make that happen, and a direct-to-investor campaign done well is almost a necessity, I feel like at this point.
Bill Kaitz: 50:43
I’d say for any company it is. I mean, if you’re a small cap company with 90% institutional ownership, you’ve worn a bucket in your back pocket or you’re in his back pocket. Maybe you don’t need liquidity, but I started one of these conversations by saying that if the goal is trading volume, then in my opinion that’s always a byproduct of having a large number of shareholders. In my experience, almost 20 years now, price appreciation is always a byproduct of your ability to build value while navigating the capital markets. It has to be both.
I’ve seen really good companies with really great businesses that signed some Faustian bargain, thinking that they could outrun the paper mill, and they thought, well, if I could just get this $20 million, I’ll be fine.
But they signed these elox or these ATM transactions and they just got buried under these ratchet financings that they didn’t really anticipate. Or, like every business, you hit something unforeseen, but I’ve never seen a company be able to outvalue a printing press.
So what trading volume gives small cap companies is options and at the end of the day, nobody ever wants to have their back against a corner and only have one source that the scariest number in business is one. So if you’ve only got one term sheet and it’s ugly. It’s likely because your trading volume sucks and trading volume gives small-cap companies options, and that’s what all small cap companies need is options.
You don’t want to be paying it in a corner or anything. That was a good point by Terry is you can’t just build value, you’ve got to navigate the markets.
John Newtson: 52:28
Yeah, absolutely. And so then, I guess the last big area to talk about then would be the regulatory side of this. What are the regulatory boundaries here? What would we have to think about, I mean just to even begin thinking about these campaigns?
Bill Kaitz: 52:49
I mean there’s a lot. So, obviously, engaging with good SEC counsel first and foremost, I highly recommend a fighter like a litigator, not a brokerage compliance, but hire a good litigator.
I know you know many to review these thoughts, but hire somebody who’s been in the trenches and fighting because SEC laws. We’re still working off the Securities Act in 1933 and 1934. They didn’t necessarily have the internet back then.
So you really have to have somebody who understands the interpretation of the securities code. And I’m pretty well versed in this area. As you know, I’ve been in front of the SEC on investigations twice. Once I’ve settled and although I can’t admit or deny anywhere I’m doing in that, what I can say is the substance that the SEC has never challenged, the substance of my promotions.
So, although I have faced the SEC for things like disclosure, which I’ve settled the substance meaning how we told stories and where we placed media I did not face any allegations or scrutiny in those areas or be challenged in those areas. So what I will say is there’s a pretty simple basic one, right, I mean this urging anybody to buy a stock based off of one article is just, I mean the number one.
It doesn’t fix your goal. Number two it is kind of unconscious, unconscionable, right Like you’re asking somebody to invest their hard earned dollars based on 8000 words. You know it’s not realistic and it doesn’t feed that in any way. So when we were guilty of doing that because that was the norm, you know, 15 years ago but when we were advised by council to remove it, what we actually found is our engagement went up, like our engagement increase when it wasn’t so urgency by the stock today. So it was kind of like one of those things we never wanted to do. But once we did it, we actually saw the benefit of it.
So it was a regulatory change. But you build better trust with an audience when you’re not, you know, dragging him by the ear. So you’ve got to be very careful about the how you structure your message. Number one you don’t want to, you know, use any hyperbole. You don’t want to use any urgency by the stock today. The other thing is media. I really want to. The one thing that I see an awful lot of is because somebody else is doing something, I’m going to do it.
And the SEC is very effective. They have one of the best research internet research divisions in the country. And just because nobody’s getting indicted for getting named in a complaint today doesn’t mean they won’t. These things take three to seven or more years before the SEC completes all their stuff and files their charges.
So you know social media is extremely dangerous for paid disclosure. So if you’re, you know, if you’re the issuer, if you’re the SEC or Elon Musk, you should obviously be careful. You can be a little less careful than if you paid somebody. What I always encourage people is if it’s not, if you can’t confirm this by the way the SEC regulations are written, then don’t do it. So the SEC 17B says when describing a security, you’ve got to disclose. So if we write an ad that shows up on Google that says this Nevada lithium company could explode, which is number one, hyperballistic, but it describes the issuers If you can’t disclose inside of the Google ad, then technically we view ourselves to be in violation.
So understand how the law, how the regs are written, make sure that it’s compliant and, frankly, it stretches you to find it’s a benefit. It stretches you to find more new and interesting ways of telling a story. Avoid anything that they’ve proven. They just really don’t like Things like phone rooms to individual investors. They’re just, they’re just out. I won’t employ any of those methodologies because you can’t talk to a retail investor individually unless you’re a licensed broker. I mean you can if you’re the issuer within the confines of regulations, but it ultimately becomes relatively easy because they’ve written everything down.
You can reference it.
And when we find that we focus, when you focus all of your attention on a more sophisticated audience, where you’re longer term investors who buy financial newsletters, you’ll find you don’t need a lot of these little hacks and tricks and gimmicks.
You just need an interesting story to tell, in a way to follow up with them on your own terms. And I mean you’ve got lawyers that have talked about this stuff. For me it’s always been. If it’s not, if it can’t be proven to be effective, consistent and compliant those are our three uniques we won’t employ it.
And I can’t begin to tell you how many conversations I’ve had over the last 15 years where somebody says, well, so, and so is doing social media, I’m like well. Or influencers, I’m like well, I don’t understand how that’s legal, so I’m not doing it Right. So I think common sense is just.
If you can’t connect the regulation to the method, then don’t do it.
John Newtson: 58:41
That’s good advice. So I guess then, just a final look what does a good client look like to you at this point? Like, how do you like this guy? Somebody who comes to you like, okay, this guy’s buttoned down, this is somebody that we can really help.
Bill Kaitz: 58:56
So, first and foremost, it’s value creators over value consumers.
You know, one of my best clients is a guy that you know. Every time he starts a new issue or brings a new deal public, he’s basically stuffs the mattress. He’s not selling any stock. He had the same amount of shares the year I started with him as he did the year he uplisted to the NASDAQ Right.
So for me it’s a NASDAQ or New York Stock Exchange listed company only because of the settlement with the SEC. I will not work with a penny stock company. And it’s a value creator, not a value consumer. As somebody who is willing to be led by experts in a collaborative environment, I want them to be an expert in what they’re building and rely on me for my expertise on how to let the world know about it, and then we’ll collaborate on the strategy.
They’re not afraid to invest in their market and they have some prescience. And I think, other than that, I’m sector agnostic. I’ve worked on everything from software to biotech to mining. I understand a lot of sectors enough to translate it into retail. But I’ll say this you know, if you’re a bedpan manufacturer with 24% compound annualized growth, I probably can’t help you, because you know there’s not a big idea or a different world we always in our copywriting I was taught this by David Deutch, he calls it the four C’s. So when we look at a public company, we say you know, is it clear, is it credible, what does it change and is it compelling to the head and to the heart? Right, so not necessarily in that order, but is it clear and credible? Is it compelling to the head and the heart and what does it change? And if we can answer those four questions that I take them on as a client, I’ll say that you know the media to build one of these things is not cheap.
So, although it was call it 18 months on average with my clients, they spent about 2.2 million in media over the course of that 18 months. But they renewed 13 times. So they had to make the conscious decision 13 times to renew with us, I’m assuming, because they both saw value and because they were leveraging the market. So I’m not saying that somebody has to be willing to commit to spend 2.2. Our contracts obviously were not for that amount of money. They were auto-renewing contracts.
But you know, considering, they got $4.64 back on average for every dollar they spent on media and net cash, I have to assume they were happy with what they were getting. So I would just say you know, if you’re looking for something that’s $7,500 a month or that’s your budget, it probably wouldn’t be worth your time to look at these sorts of media campaigns, right?
But if you’re willing to commit and spend, you know, 30 to 50,000 USD a week to build your own audience, this is for your audience, then that I’d love to talk to anybody. Awesome, also for your audience. I talked to them, whether they wanted to be a client or not.
John Newtson: 1:02:13
I appreciate that, and what’s the best way? I mean, I’ll post a link to stuff to reach you, but what’s the best way for someone to reach out to you?
Bill Kaitz: 1:02:22
The best way is email, and that’s Bill [at] hereisyourfirecom.
John Newtson: 1:02:28
Okay, fantastic. Well, I appreciate this Bill. This has been awesome and always educational when I talk to you, so I appreciate it.
Bill Kaitz: 1:02:35
Thanks, I hope I didn’t bore a gloss over too many people.
John Newtson: I look forward to talking to you again, Bill. Awesome, take care you too. Bye.
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