Robin M. Sundstrom

IRonside Investor Relations Inc.

IR people hear the same complaint about many small-cap stocks.  Portfolio managers, brokers, and traders alike will tell us, “There’s no liquidity.”   “It trades by appointment.”  “If I want to trade it, I almost have to arrange a buyer myself.”  “It’s too illiquid for me to buy.”

It’s one of the biggest problems faced by the small-cap sector.

Often these stocks don’t even come close to turning their float every year (every IR person’s basic goal) – they just don’t trade enough.  New listings especially suffer from the disease, unless they’re lucky enough to be one of those “flavour-of-the-month” stocks.

But wait just a minute. Are these stocks really just lucky?  Not a chance.

Liquidity has nothing to do with the exchange your company trades on. Although it does in some respects relate to the company’s size, sector, or sponsor, it has nothing to do with luck.  Orphan stocks appear on all exchanges – though ones with dedicated market makers, such as CSE, help with this. But regardless, liquidity arises from getting out a good story and selling – not just telling – that story to active investors.

You might say that liquidity is a function of loquacity.

If you doubt this, consider a couple of examples.  During the years (and years, and years) when gold was in the dumps, Rob McEwen held regular investor lunches in his office, no matter the news.  As a result, his company, Goldcorp, had consistently stronger valuations than most of his market peers, even before the company began to pull significant gold out of the ground.  People felt they knew the management, knew the stock, and they developed a comfort level with the company.  Throughout McEwen’s time at the helm, Goldcorp traded well, with solid volumes, despite gold being in disfavour.

More recently, Medipattern, a small medical imaging software company trading on the TSX-V, got a terrific response to some news about a contract with GE Healthcare – something they had told investors about at length so that the market was well aware and ready to trade once the deal was signed.  On the CSE stock exchange, it is no surprise that mining companies are consistently among the top traders.  Mining companies’ managements know they have to get out and tell their stories through both good times and bad simply to survive downturns in the commodity cycle.

It’s not rocket science, just persistence.

So yes, there are many elements affecting liquidity, including:

  • Size – investors tend to be more cautious about small companies.
  • Freshness of story – if brokers have heard it before with no action following, they’re not going to respond on re-hearing.  It’s Einstein’s definition of madness, doing the same thing over and over, while expecting different results.
  • Market environment – if the market sucks, chances are your volumes will also.  And sometimes this can be a blessing, at least temporarily.
  • Management – if investors like management, volumes will quite likely be higher.
  • Multiple or ongoing share issues (as for growth companies or infrastructure companies) will encourage trading, at least as long as the brokerages have stock to flog; and
  • Industry – there is no question that industry sectors go in and out of style, and this can definitely affect liquidity.

Obviously, most of the above are just not things the IR officer, or even management, can easily affect.  But one thing is well within reach:  the company’s story.  Shape it, tell it, sell it, and follow up with your audiences.

The process is straightforward.

  • Refine your message.  This should be done on a regular basis, as stories can get stale, and strategies that fly one year can flounder the next.
  • Craft your presentation.   Focus on your audience, poll them so you’re aware of their needs and biases, and as far as honestly possible align company plans with audience needs.  Make it crisp, compelling, and informative, but don’t kill the listeners with details – you’re looking at a 20-minute delivery time, which when you come to think of it is far longer than most of our attention spans.
  • Practice delivery.  This is important.  The person who is delivering the presentation needs to know it cold, including the numbers.  This can be a solo show or a shared task, with the CFO, for example, delivering the financial part of the presentation.
  • Make the calls.  Use the company’s database, but work to expand it through management connections, friends, referrals, and general networking.  Most people know the ropes and are okay with getting the calls.   It’s the only way to build the company’s contacts.
  • Sell your story, don’t just tell it.  If the person delivering the presentation doesn’t come across as a believer, why would any of the audience decide to buy the product?  This is a marketing show, and the product being sold is the company’s stock.  You have to make the value proposition for investors.
  • Follow up.  Find out what the audience thought and use the feedback to improve the presentation and delivery.

Follow these guidelines, and I guarantee that liquidity will improve, regardless of stock exchange and all the other variables.  Others will be asking you how your company got so lucky, but you’ll know – it is not just luck.

Robin M. Sundstrom is founder and President of IRonside Investor Relations.  IRonsideIR is an integrated communications firm specializing in investor relations, strategy, branding, and design. IRonsideIR is dedicated to one task: Raising the profile and positive perception of its clients within the business and financial communities.  You can contact Robin by telephone at 416-368-8770 x223 or by email at

Since 2005 ITB Solutions has provided listings development services to stock Exchanges in Canada such as the Canadian Securities Exchange. ITB Solutions currently provides New Listing Services to the NEO Exchange. We assist companies with the listing application and managing the process to become publicly tradable in Canada, as well as offering advice on how to make the most of your public listing. You can reach Jeffrey Stanger at 647-500-0492 or by email at