Interesting perspective from LD Micro
VRUS management and the Board could learn a few things. They haven't bought a single share in the open market since Verus was formed. Moreover, the bloated share count makes for an easy target as described below. Mark Forney, what's going to change this dynamic?
Christian Galatti
Phase IV Research
How Microcaps Can Beat the Quants
Every company on the Market goes through a daily price discovery war. Competing factions, both visible and invisible, vie for their version of the truth molded through the force of capital. On the major exchanges, and on the floor, the perspective is normally one of balance unless event-driven. Positive and negative forces push and pull within respected norms. But, that’s not how it is for microcaps.
How many in management have no clue where the selling is coming from. How many CFO’s wonder why nothing matters. How many in IR can’t explain the action unless it’s attached with news. As the small cap specialist to CalPERS for over a decade I have seen small caps go from considered an opportunity to becoming a universe of the hunted.
If there’s no estimates, no coverage, and growth in later years the quants will attack until they reach the bottom line where they know there isn’t one. The Market for microcaps is completely different than all of its relatives because there was never a balance to begin with. If nobody owns the stock, and nobody knows the story, then there’s nobody to buy if the quants sell, and they are smarter than you, so they keep selling into that lack of support to collapse the equity because they know nobody is coming to help. It’s too easy. Just like in the real world. It’s easy to attack the defenseless. An almost victimless crime because nobody knows the assaulted. So it goes on until there’s some sort of mathematical floor that is reached far lower than anybody could comprehend.
For every success that has reached escaped velocity there are ten others that are being manhandled by the Kung Fu Grip. The lesson here is just as much for management as it is for investors. Insider buying by all on board is the only way to avoid this trap. This war that cannot be won. For the investor it gives confidence that if management is going all in, there must be something there. For the CEO, the CFO, what it does is bring a blaring spotlight of positivity, an instant event that is broadcast to every institution and retail investor on earth. When you have to fight the invisible it’s best to be obvious. Without a balanced book microcaps lose daily. The only way to beat the computer is to make the truth by buying in.
12 days into the decade and the LD Micro Index has gone on to underperform its larger cousins by quite a bit.
