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The five faces of the market

The five faces of the market.

"Our top 20 is sticky, but we don't know why people are selling"

It doesn’t matter who said these exact words to me this week - because this is a sentiment shared by most companies I talk to. Why are they selling out now? Why buy into a placement only to sell out at a loss? If they understood where we were they would see this is the worst time to sell!

Most companies start looking for a silver bullet, but there isn’t a one size fits all for the market - because, like a 90’s boy band, whilst they are all trading on market every investor is just a little bit different.

(By the way - I don’t think I have ever seen a more 90’s photo than this…)

Everyone is looking for headline returns - no doubt - but the drivers and success factors of each group are wildly different. So your language and communication style need to be different too.

Below we will break down each group and highlight why they are here, what you can say and how to scale that message.

  1. Retail
    Retail is extremely valuable if you are sub-$100m market cap and/or turnover less than $50k/day. These people make your market and can shatter your share price. You may not raise from them, but the price that you get will be determined by them.

    Why are they here? Make multiples on their investment
    What can you say? “If you have any questions I would love to hear”
    How can you scale? Run an asynchronous webinar as 4DS did here
    A tip: Treat them well and they will advocate and share your message

  2. High Net Worth investors (HNWs)
    I used to joke that there are more HNW investors named Michael who are retired engineers than women. Now I have the data, and sadly, it’s true.
    These guys typically have time, love to be early and want to go on the journey. They can buy on-market and love a deal. At a $35k average cheque size, they add up too. As of today, you probably have 200 of them on your register: that's $7m of potential cash…

    Why are they here? A fun way to actively make money post-retirement
    What can you say? “I think you will understand what we are trying to do”
    How can you scale? Email and get into HNW groups
    A tip: Get them emotionally involved in the Company & team and they won’t want to sell

  3. Institutions (Instos)
    The fabled high conviction institution. Like the unicorns of old, it feels like this group is becoming harder to find. Instos love relative returns. Whilst the first two groups make absolute returns (i.e. $1 going to $1.50), instos make a return by outperforming the market - so don’t tell them why you are going to do well - tell them why you are going to do better than the market!

    Why are they here? Make more money than the market (relative return)
    What can you say? “We are going to massively outperform the market by…”
    How can you scale? You gotta get face-time to build a relationship here.
    A tip: They won’t buy in on-market much, or buy into sub $50m companies in general. Target them for cash and build a relationship early.

  4. Desk Brokers
    Most companies think about Corporate Advisors when they think of brokers, but companies like Ballieu’s had 2 Advisors and 70 HNW desk brokers when they sold to Ords. These people manage money for HNWs and family offices. They are looking for risk-weighted returns and can be powerful if they get behind you.

    Why are they here? Generate risk-weighted returns for their clients
    What can you say? “Tell me about your client base and what they are looking for?”
    How can you scale? Start with email and set up a call
    A tip: Desk brokers are 10x more conservative than their corporate advisory cousins

  5. Media
    A bit of a strange one to include here but hear me out. Media are a conduit to all 4 other categories and help de-risk you in their eyes as it is a source of third-party validation. Try and target non-paid financial media (AFR, The Australian) and follow journalists that you want to be covered by to learn their styles. Understand them so when you pitch it is super relevant to them.

    Why are they here? Generate unique articles and fill columns
    What can you say? “I love your articles and notice you cover X topic regularly. I am the CEO of Y and a 30-year veteran in the space. If you ever have questions or need a comment let me know.”
    How can you scale? Follow them on Twitter and engage with them
    A tip: Engage but, as always, make sure not to disclose market-sensitive information

Which ones are on your registry?
Before you create a communications strategy, I’d recommend pulling your registry data and looking at your shareholder makeup to identify which investor types are influencing your share price most. For most of you, it’s probably more likely to be retail, HNWs, and desk brokers, but I stress that you should have a look yourself! Once you have an idea of who’s there, create some investor campaigns.

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