The three pillars that influence your share price.
“All we need to do is wait for our results to come out, and the share price will go up.”
This is an easy throwaway line.
It can be true, but it's also very dangerous because it ignores a lot of key drivers of a share price.
Just like our legal system, being ignorant doesn't exclude you from the system.
We all know by now that the share price is influenced by buyers and sellers. Our long-term readers will remember that sellers are equally as important as buyers.
Rather than thinking about WHO is buying or selling, this is about WHY they are, which comes down to the three M's.
- Macro
- Micro
- Marketing
Let's unpack the three M's.
Pillar 1 - Macro
These are typically board aspects that share two key traits. (1) They aren't unique to you, and (2) you can't control them.
A financial crisis, market-specific events, regulatory changes, economic data below expectations, commodity pricing, sector impacts and etc.
All broad-spectrum items that impact your share price but have nothing to do with you and for which you can do nothing to influence.
Your job here is to:
- Be aware: know what's going on to understand the impacts.
- Be prepared: these can be large swings (think BNPL or oil price movements) and rocket up or down.
- Take advantage: if your sector is hot and things are broadly good (even if you're not doing too well), it could still be a good idea to raise and shore up the books.
Macro is general knowledge you need to factor into the plan because, at the end of the day, neither you nor I can influence it.
Pillar 2 - Micro
This is all about you.
When we talk about the 'company behind the code', this is the company.
Key hires, movements in revenue, international growth, product line development, drill results, medical trial wins, etc.
In an ideal world, this is the only pillar we want to be judged on. But that's not this world; more likely, it's one-third of the outcome.
If you optimise solely for this pillar, you'll leave a lot of value on the table.
This happens when:
- Good results get little to no traction.
- You get traction, but it reverts quickly (and then it looks like a pump & dump).
- And other times, you put out great news, and nothing happens at all.
Micro is all about you and is within your control. This is how you run your business, and only you and your team can influence it.
Pillar 3 - Marketing
I'm a late convert to marketing and only really understood its importance in the market over the last few years.
It's amazingly powerful and definitely the easiest way to influence your share price.
Like all marketing, there is no silver bullet.
Brand building, communications strategy, acquisition, retention and growth.
It is beautifully influential, and I’ve seen a thing or two over the years, including:
- A mining company hit NOTHING, and its share price stays miraculously flat.
- A market cap difference of more than $1bn for two companies with near identical resource deposits side-by-side.
- Companies run out of cash and fail to deliver on the business (pillar 2) because they didn’t take shareholders on the journey and couldn’t raise what they needed.
A lesson learned too late.
Investor marketing encompasses investor relations, road shows, your decks, your website, and your voice in the market. It’s definitely something you can influence.
I’ve got dozens of stories where investor marketing made the difference in share price, between director options being worth $0 and them being worth millions.