Investors often ask about "Earned Secrets" when talking to founders. Here's one I discovered recently for small-cap publicly-listed companies: an IPO does NOT generate automatic demand for their stock That is nuts. One assumes that an IPO releases this torrent of demand from people who can now buy your stock. But no. Often, the CEO and CFO have to work even harder to generate buy-side demand after going public. Pitching to institutional investors, attending conferences, showing up on CNBC, working with Investment banks etc. One small cap company I spoke to that is planning to go public soon (~$1bn market cap) planned to give 15% of its cap-table to financial influencers to help drive exposure to their stock. That's roughly ~$150m in value. Why? B/c as Charlie Munger said, Incentives run the world. The CEO is paid, atleast significantly in part, based on stock performance in the public markets. So is the exec team. Creating excess demand also lowers a company's cost of capital. Just look at Tesla and the effect Elon has had in funding all those gigafactories. Shareholders approved his $56bn pay package b/c Tesla stock has done exceptionally well over the past 6 years. Generating demand for the stock (a) creates liquidity and trading volume, good for all shareholders (b) ceo & mgmt team get paid. Pretty simple. The incentives couldn't be more aligned. This is a core problem we're going to explore with Stonks.
