Why small cap companies no longer have any excuses....

If ever there was a time for small-cap companies to clamour for your attention, it's now.

And it's never been easier for companies to 'DIY' their communications. So if they really want and need our capital to do great things with, then why aren't enough of them telling us? You often read comments from private investors lamenting the lack of good PR in telling the exciting stories of the companies in which they're invested. On the other side of the coin, you'll hear directors bemoaning the lack of market understanding about the company's opportunities and exciting future, and so on. There are lots of efforts small companies can make to get themselves better noticed. For me, three stand out from the rest. In reverse order, they are:

3. Paid-for research

A lot of private investors are rightly suspicious of the kind of paid-for broker or other research notes you see on the web. Companies criticised for paying for such coverage, though, must feel a little "damned if they do, damned if they don't". The fact is that such research can be tremendously helpful in giving the kind of at-a-glance information we seek. The (free) reports usually add a different investment perspective and make the bull case very well. And we're grown up enough to realise that it's the subjective bull case we're reading.

2. PI presentations

Presentations of one kind or another to private investors are even better. Whether private one-off events or collective investor shows or presentations like 'Oilbarrel', such presentations give you a less formal setting in which to pose questions than the legal necessity of the AGM. The drawback is that they aren't usually web-based -- though there are sometimes live webcasts, podcasts and the like -- and they often tend to be a little dry. Of course, witnessing a presentation to which others aren't privy can give you an edge. But from the company's perspective, the attempts to reach a much wider audience usually require something different.

1. Video

For me, the video is the single most important tool I've found in helping me think beyond the numbers. You get to metaphorically look the company in the eye and to get a real feel for management's thoughts and plans.

It is said that 90% of all communication is non-verbal. If that is true, then this tool certainly helps fill the missing gap between simply what is written or stated and what is meant. AGMs and private investor presentations do the same thing, but the flavour is distinctly different.

In September, my Foolish colleague Simon Murphy looked at the innovative way private investor Paul Rutherford engaged with Xcite Energy (LSE: XEL). Paul organised a group of fellow Xcite investors and produced a short film outlining their desire for the company's directors to improve communication and create clarity. It worked well.

So now his ishareinfo.tv initiative has been established to help support AIM-listed companies that wish to communicate more effectively with their private investors.

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The most recent production (showing on YouTube) has been on oil and gas explorer New World Oil & Gas (NEW), which listed on AIM earlier this year and is drilling in Belize.

Last week, the firm issued an upbeat update on its competent person's report (CPR) concerning its Blue Creek project in Belize. Apparently, the CPR raises the prospects of drilling success to one in five.
The CPR and other issues are explored by ishareinfo.tv in three short videos. One of these shows Executive Directors George and Peter Sztyk discussing the prospects in Belize.

Another looks at the company's strategy with William Kelleher, Chairman & CEO, and creator of Victoria Oil & Gas (LSE: VOG).

But what's really refreshing about this approach is that we also get to hear from private investors, who tell us how many shares they've bought and why. This offers a very welcome and different perspective from people who've put their money where their mouths are.

Bottom line

I respect the views of private investors who actively prefer not to get beyond the numbers, so their judgement doesn't get clouded. Also, all these measures are for companies that want to improve their communications. Sometimes, the steadiest small caps with plenty of cash hide their light under a bushel, while others seem to prefer as little focus as possible on their activities. But I think the smaller the company, the more these communications are useful in understanding future plans in a far more comprehensive way than written materials and facts and figures only -- with video being helpful in particular.

So well done Paul; please let's have more, and not just from explorers.

Motley Fool

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