Memo to the Media: Stop Ignoring Small Public Companies


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Here’s a newsflash for the mainstream business media in the United States: there are more than just 500 public companies – a lot more. And ignoring them, or incessantly referring to them as “penny stocks” that are “rife with fraud,” isn’t helping the economy; it isn’t helping the companies; and it isn’t helping investors, either.

Why are small public companies ignored?

Read The Wall Street Journal or watch CNBC or Bloomberg, and you principally hear about two segments of the capital markets: the S&P 500, and hotly anticipated IPOs. Apparently, public companies in the U.S. are either global titans or venture-backed stars?

mediaHardly. In real life, there are 15,000 public companies in the U.S., and most of them are small. You need look no further than Nasdaq and NYSE, where almost half of the companies have market capitalizations below just $300 million. You read that correctly: almost 50 percent of U.S. exchange-listed companies aren’t even large enough to be considered small-cap companies (i.e., they are micro-caps).

But when is the last time you heard or read a story in a top-tier business outlet about small-cap corporate boards, where the overwhelming majority of public company board members serve? When is the last time you heard or read a story about the small-cap financing marketplace, which, incidentally, is larger in many years than the IPO market? You would think that there would be myriad stories in the media about small-cap shareholder activism, since nearly 80% of shareholder activism is actually in micro- and small-cap companies.

Does anyone else think it’s somewhat anomalous that most public companies are virtually ignored by leading business reporters?


Is silence better?

When you consider how pejorative the reporting can be when it takes place, perhaps no coverage is preferable. Here are a couple of examples.

  • Corporate finance. Most public companies are financed by direct investments from hedge funds in transactions that are similar to how private companies are funded by venture capitalists. When those investments are negotiated privately (as opposed to public stock offerings) they are often called PIPEs, which stands for “Private Investment in Public Equity.” When cultural icons like Warren Buffett (Goldman Sachs) and Oprah Winfrey (Weight Watchers) make PIPE investments, they are never characterized as “PIPEs,” rather they are heralded by mainstream business media as “skillful,” “creative,” and “strategic” financings. But when these same reporters occasionally report on the multi-billion dollar small-cap financing market, these financings – dismissively characterized as “so-called PIPEs” – are serially labeled “shady” or “last gasp capital” for “pump and dump penny stocks.” Memo to corporate finance writers: (1) a PIPE is a PIPE, whether it’s transacted by Oprah or ABC Capital Management; and (2) the life-saving drug your family recently benefited from was likely made possible by a hedge fund’s PIPE into a small biotech company.
  • Capital markets legislation. I remember reading a 650-word piece in The Wall Street Journal about a bill to enhance capital markets access for micro-cap companies that had more than a half-dozen references to “fraud,” “penny stocks,” “market manipulation,” and “swindlers.” Now, is there fraud in the micro-cap ecosystem? You bet there is. That said, Fortune 100 companies pay billions of dollars in fines annually for all kinds of regulatory transgressions; why aren’t investors reminded of that in every story about large-cap companies?

What’s the harm?

Ignoring small-cap companies and issues (or speaking disparagingly about them) hurts small-cap boards and investors, because there is a yawning disconnect between what most directors of public companies deal with on a daily basis, and what is principally written about by business media. For example, relentless reporting notwithstanding, most public company directors don’t care at all about proxy advisors, because most public company stocks are predominantly retail-held. The overwhelming majority of public company directors, however, care plenty about managing risk on shoestring budgets, but there are never constructive pieces produced about that.

Here’s a respectful request to leading U.S. business media. It’s time to start treating small public companies for what they are: (a) creators of countless American jobs; (b) sources of life-changing innovation; and (c) smaller versions of large public companies.

To wit, in 1971, yet another fraudulent micro-cap stock run by hooligans went public with a market cap of just $58 million. That company was called Intel.

A version of this article was previously posted through LinkedIn Pulse.


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A globally recognized small-cap expert, Mr. Epstein has advised, governed, and invested in hundreds of small-cap companies. His capital markets and corporate governance acumen are products of a singular perspective – a former corporate attorney, operating executive, institutional investor, and, now, board advisor. As Bloomberg Businessweek commented regarding Mr. Epstein’s category-defining corporate governance book, “attention, directors of small-cap companies. Help is on the way.” 

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