Discover How to Make Your Stock Hot Like Megan Fox Without The Makeup..
“What’s hot today isn’t likely to be hot tomorrow. The stock market reverts to fundamental returns over the long run. Don’t follow the herd.” Warren Buffett. Listen to Warren if you are buying stocks, but if you are the one issuing stocks and selling to the public, you need to follow the herd in order to capture the wave.
In this article I want to share some ideas about what characteristics generate excitement within stock buyers. If one day you want to float your company on the stock market this is for you. Note: This is one mans opinion.
There are many types of investors, day traders, long term holders (usually European), investors who only like tech or mining stocks, there are investors who like dividends and there are investors who like capital gains. Therefore it's very hard to generalize, but I am going to make the attempt.
I want you to put your feet in a stock pickers shoes and think the way they think. If it's a man and you had him on an interview he'd probably say picking a stock is like picking Miss World in a beauty pageant before the contest even started. He'll also say, you want to guess which woman the judges will like the most. I couldn't agree more.
The first thing anyone has to do is to get a company's enterprise value which is usually higher than it's market cap if the company has debt and cash (rule of thumb the higher the debt the higher the EV) . The cash and the debt is very important to look at because you have to determine what the enterprise is worth versus what the shares are worth. In other words you must take the static elements out of the equation. There is a difference between the value the market gives a stock and the value of the business. Then see if you buy the whole company with cash (all outstanding shares) what is your payback period? Usually if you buy a stock on the market it's give or take a 15 year payback period. So anything under 9 years and you'll be considered hot.
Market Cap - Cash + Debt = Enterprise Value. (FYI) Look at a company in your industry that is public and see what they are trading at and evaluate their enterprise value in order to get a feel on what your stock should be priced at.
So before you float you might try to price your company at a 9 year payback period in order to spark the interest of the institutions. Generally what everybody wants is a cheap stock that sky rockets. Or you want to find an ugly duckling that will turn into a swan.
https://www.youtube.com/watch?v=TyrmcD8Yml0 (Here is a link to the Ugly Duckling story)
If you are floating your company through a reverse merger you are considered an ugly duckling. Most reverse merger shells are ugly ducklings. They had a business, but were too small or were on the brink of failing, and someone took the initiative to take it over because they know that this shell is worth more than the running business. Therefore rescuing the little value for the poor shareholders as the management have just plainly abandoned the company.
An associate of mine is a market maker, and his firm syndicates it's underwritings to over 44 different broker-dealers. These firms would invite my associate and me to their due diligence meetings for their underwritings. Note: The underwriters want as many market makers and buyers as possible.
What happens at these "dog and pony shows" is the underwriters try to get the brokers to have a few drinks before the show, and as the mood starts to get lite, the underwriters jump up and introduce the company's president who in turn is raising capital. They give him ten minutes to pitch, then the CFO pitches the numbers. If it's a tech company and the tech is really hot then there would also be a pitch done by the CTO.
After the directors finish their charts and graphs, the underwriter asks the assembled crowd to fire out their questions. Usually there are between 50 to 200 brokers in attendance and they would ask very though questions. I have seen deals die when the entrepreneurs reply with the wrong answer, you can feel the air in the room get sucked out of the building. Assuming all goes well and the questions slow down, the meeting breaks formally and the 200 brokers bombard the directors. Once the brokers are comfortable and feel like they have all their questions answered, they go back to the underwriter and perhaps give them the number of shares they might be interested in reserving (circling). The underwriter naturally says that's going to be extremely difficult because we have an overwhelming amount of demand for the stock. Ultimately doing their job of creating demand.
By attending the meetings one starts to get a feel on what the brokers will and will not buy. In other words I gathered the exact characteristics a company needs in order to be popular on the market. I will not be able to give you all the information as it will take hours, however I will try to summarize it. We established one rule of thumb above, now lets give you the others.
Your company has be in a fast growth industry and in a big market, have little competition as well as an edge. Huge backlog, rapidly growing historical sales and a superior technology.
In addition to the potential of large profits is large profit margins in the vicinity of 40%, low COGS or raw material costs, a unique tech stack that adds massive value to its users or saves large amounts of money, thus allowing the corporation to charge through the roof for its use. You have to be able to increase your product prices without getting the the end consumer to flee.
Finally, a little window dressing, strong board and the stability of customers and employees. If your assets are your key employees, like a talent agency, and they go home at 5 P.M, that may not excite the underwriters.
Most stocks that trade on the second tier markets have some hot tech stack or they are in a hot industry like NFTs or blockchain. These companies know what their doing, they know that the public's imagination will run wild in a field that is being touted as the next big thing. I have seen a mining stock change it's name to ..... blockchain and the stock shot up to the sky, and they weren't even doing anything with blockchain. For brokers these are easy stocks to promote.
Every street in the world has its Fads, Whether its Wall Street, UK Street, Stockholm Street, or Frankfurt street. It's a beauty pageant or a fashion parade. This year's hot ticket will be offered on sale next year. So as an entrepreneur you have to have your eyes and ears on the ground so you can spot the wave and ride it, however only as long as it's moving in the right direction.
If you get it right, some of these waves can be quite large and last long for example from 2012 to 2019. As well as the internet boom, the gold stock boom of the 80s and the oil boom after that. If you go back in history far enough you can find the conglomerate stocks of the 60s which was the greatest time for entrepreneurs, where all the hostile take overs where taking place, the age of the company liberators under the financing of Michael Milken and the un acceptable face of capitalism that Margret Thatcher used to tort. You also had the 1950s uranium stocks and not to mention the great decades of the hot railroad stocks that the robber barons peddled after the US Civil War.
Take note if the industry or item is being featured all the over the news and social media you can bet that this is where the excitement is. Some companies peddled oil spill products after the BP oil spill, cure for AIDS when that was big, security products after 9-11 and masks or sanitizers after the COVID-19 pandemic. I'm not saying going out and start selling these commodities but rather finding companies that are already doing so, increasing their EBITDA and taking them public.
Interestingly people rather buy the blue sky which sparks their imagination rather than the actuality. That is good news for us. For decades, public biotech companies have known this and exploited it to hilts...
In summary if you are an entrepreneur wanting to take companies public whether through, reverse mergers, IPOs, Reg A+ mini IPOs and SPACs, look for fads, look for something that will capture the media and finally look for fast growth and all the rule of thumbs mentioned earlier.
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In monopoly (UK Version) it works out that Pentonville road, Angel of Islington & Uston, the light blue sites on the left give you 159% return and are the best in terms of arithmetical return but the dark green sites which are what people think that are better Oxford Street, Bronze Street, and Regent Street only give you 101% return so they are very bad. The next best sites are the orange ones which are Bow Street, Vine Street, and Malbrough Street. They give you 141% return but they are better than Pentonville Road, Uston & Angel of Islington because there is an increased incidence of landing on them.?You land on them more often and the reason for that is, there is a card in the chance that orders you to go to jail. And if you go to jail, you are past the blue sites and about to land on the orange ones. In addition to that, there is another card in chance, ordering you to advance to Pall Mall which does the same thing, it takes you past the blue sites and another one demanding to advance to Marly Bourne Station.
There’s also another one demanding you to go back three spaces, which in one position will land you on Vine Street. So there’s an overwhelming case for having the orange sites. Now, most people do not know that.??
Quote
"Life is movement and movement in my opinion is represented as a wheel. It may be a car wheel, bicycle wheel,?or even a semi-truck wheel. In the end, you choose the size, width,?and type of rubber. What’s even better, you also have a choice to fill it with more air than the recommended pressure (for some that’s un heard of), however, one thing is crystal clear; to live a full life and have choices you must be willing to transform into a wheel rather than being a spoke on that wheel."
Amer Alamer (aka. Lamar Sidwell) is?venture capitalist and an expert in structuring real estate and business transactions. He is active in the mergers and acquisitions space as well as property development. He has been awarded three Real Estate Development Awards 2019-2020 (Best Developer Europe, Best Fiver Star Developer Turkey, and Best International Developer) by UK members of parliament and 80 other prominent judges at Prince Waleed Bin Talal’s hotel, the Savoy Hotel in London. Amer Alamer also helps small to medium-sized enterprises scale and exit by using public vehicles. He is also the winner of the Gold Stevie Awards 2021 for best innovation in the Financial Industry Middle East.
He is an author of How To 144X Your Options In Life which teaches how to structure real estate and business transactions using options. As well as taking them public on a recognized stock exchange. He has been featured in Smart Investor Magazine with a 4-page story.
Disclaimer: This material provided in this article should be used for informational purposes only and in no way should be relied upon for legal or financial advice. Also, note that such material is not updated regularly and some of the information may not, therefore, be current. Please be sure to consult your own financial advisor and lawyer when making decisions regarding your financial or legal management.?