If my email inbox is a barometer of market trends, then an ever-increasing number of small-cap companies want to gain coverage in the financial press. In part I would like to think it’s a reflection of the high-quality journalism both my colleagues and myself try to provide to our large retail investor following.
However, it also reflects a realisation amongst the directors of small and micro-cap listed companies that the market price of their shares is now largely being determined by retail investors buying and selling activity, rather than by block trades from fund managers. To put this into some perspective, IC’s subscriber base has in aggregate over £30bn of liquid assets (bonds, equities and cash), a hefty sum even for the fund management industry. So, for example, if three per cent of IC subscribers decide to buy £7,500 of shares in a £100m market capitalisation company, then in aggregate this would represent a £7.5m buy order, or 7.5 per cent of the equity.
This factor alone explains why there can be some dramatic re-ratings in the share prices in companies I highlight assuming other investors share my positive view. For good measure, I have spotted another opportunity this week.