OTC Markets Group Inc. (OTCM) Earnings Call Transcript & Summary

Okay. I think we can get started now. We have quite a lot of attendees. Hi, everybody. Welcome to the OTC Markets Group Thought Leadership webinar series. My name is Andy Cizek, and I head the Adviser Relations group. And today, we have quite a popular topic among our quoted companies, tapping into a growing retail investor network. We have a special guest, Greg Falesnik, who is the CEO of MZ Group. Greg brings many years of advisory experience and is an integral role of MZ's strategic consulting process, overseeing many of the firm's verticals, including Investor Relations consulting and outreach, ESG advisory software, stack advisory technology solutions. Greg has also built a comprehensive and effective IR campaign for both public and private issuers while leading a consulting process for multiple successful IPOs. Greg's diverse Investor Relations experience spans across several industries, including disruptive technology, clean tech, financial, tech, business services, consumer related, among others. MZ is also a long-standing member of the OTC markets, premium provider, directory and works with many OTC, QB and QX issuers. Before I turn it over to Greg, I just want to go over a little bit of housekeeping. For those of you that are dialed into the webinar, we will do questions at the end. So you feel free to type your question into the chat box. A copy of this presentation will be e-mailed to you with a recorded version maybe at the end of today or early tomorrow and will also be archived and available on our website. And with that, I want to welcome Greg. Greg, thank you for joining us today.

Yes. Thank you, Andy, and also to the OTC markets for being such a great partner to us over the years. A little bit about MZ Group. So we are a full-service Investor Relations firm with a 24-year operating history, serving both public and private clients across the micro and small-cap spectrum. We have offices nationwide and globally, leveraging a one-stop shop approach to investor relations, some of which include stack and IPO advisory. Financial and social media services, stock surveillance that measures the inflow and outflow of securities and a turnkey, best-in-class ESG reporting software we've actually developed in-house over the last 2 years in rapid consulting practice around that. Our platform is rounded out by a suite of technology services, including conference call and webcasting, press release distribution, corporate and investor relations website with over 1,700 actually completed to date for our clients.

Greg, thanks for the quick update. We're tapping -- the focus here is tapping into growing retail investor network, which has gained an awful lot of momentum this year. Maybe to kick off, how can a management team differentiate between what's retail and institutional on the investment environment?

Sure. If you could actually pop to the next slide. Maybe we just start with the basics here. So who are retail investors? Really, I mean, it's who you think of, right? It can be the mom-and-pop investors who own 10 shares in your company. It can also be investment professionals. Really anyone that leverages a personal trading account is considered a retail investor. And something that's important to know, retail investors actually invest quite a lot less than institutional investors. Obviously, for example, the medium Robinhood balance today is right around $240 per account. So in our experience, retail investors tend to like things that they can use and see. For example, services they use every day, such as AMC or even what they're eating, like Beyond Meat, which has gotten a lot of attention. This can be a huge driver for some of these really super well-known names. They also like tech-focused sexy businesses that tend to get a lot of attention. So think cryptocurrency plays, electric vehicles, really anything that dominates the media channels. And not only do retail investors invest smaller amounts, but they tend to like smaller-sized companies, which is great for OTC-listed companies. Retail investors are much more likely to invest in micro caps. There's obviously a higher risk, higher reward trade-off there rather than larger caps, which tend to be dominated by institutions with some lower risk and lower reward. And worth noting, they also tend to like simple business models. So if we could go to the next slide, please. So you've heard a lot about the rise of the retail investor. There's been a huge surge in the amount of retail investors in the market. Historically, the fees relative to the size of trades retail investors are making has been very high, but we've seen these fees come down quite a bit. And in some cases, cut completely which has really helped some of these online platforms flourish in terms of user growth. So to put some of this into perspective, if you take the top 6 top online brokerage accounts, there are over 100 million accounts. In the top 2 alone, there's over $15.5 trillion in assets. And data shows us that the average age of the retail investor prior to 2020 was about 48 years of age. In 2000 -- prior to 2020, that is, in 2020, this dropped to age 35. And over 1 million accounts were opened last year by Gen Zers with an average age of 19 years old. So that number is coming down quite a bit in terms of age. And today, retail trading now accounts for almost as much volume as mutual funds and hedge funds combined. Worth noting, these retail investors also have shorter holding periods. They tend to lock in short term gains. However, we are starting to see this change quickly. So for example, 44% of retail investors in 2020 stated they were trading for short term gains. And only 28% said they would follow this strategy in 2021. So I think we're seeing a longer-term focus from retail investors as they garner more experience and get comfortable with the investment landscape.

Greg, this is interesting to me because as we've seen Wall Street come to Main Street and now Main Street moving into Generation Z, which is a young population, the average age of the investors continues to go down. And they're investing at a precipitating higher rate to increased trade volumes. How can a management team, if I'm a CEO of a company, go about to attract those retail investors to engage them to focus on investing in their own companies?

Yes. Absolutely. If you could flip to Slide 5, please. So when you think about attracting retail investors, I think it's important to note that sort of the core basics of IR still apply. I'll start with, first, people intend to invest in stories they understand. There was a FINRA study conducted that showed new investors in 2020 could only answer 1.4 out of 5 investment knowledge questions correctly. So the idea of simplicity is really important for retail. I always joke here at the firm and say, hey, can I explain this story to my mom and have her easily understand it? So not only retail, but I think small-cap investors, in general, tend to be generalist. People can always dig deeper and take the time to understand the story. But typically, people feel much more comfortable investing in what they understand and much more comfortable actually talking about stories they understand to their networks as well, which is a really powerful thing if you think about some of the momentum and getting on chat boards and things like that. I think very important is an investor relations website as well as an investor presentation. Those can be some of the biggest assets you have for marketing. So for a website, it's important that the information is laid out clearly and very easily accessible. That's one of the first things investors go towards when they're learning about a company. So having things like SEC filings, your press releases, webcasts and presentations, maybe some FAQS, stock data and governance and management info are all important considerations to have as different tabs on the website that's well organized. And finally, I think just something that's overlooked oftentimes is just a general sign-up sheet, somewhere where investors can quick to subscribe and obtain more information and get added to your mailing list. This is a service we've actually done for many years and actually have an exclusive offer with the OTC to design and host a turnkey website completely free of charge for an entire year. So please feel free to take advantage of that, if interested. And for the deck, as I noted, it really should be readily available on the website, but try to keep the deck shorter. Try to make it as simple as possible, use less jargon, for industry jargon. Remember, these people are broader retailer or generalists. Use more pictures, try to use less words. And tell the story in a way that it's going to resonate with your audience, just make sure they can relate to it. So some of the biggest companies of the world that have really moved towards this narrative-based simplified storytelling process, which has attracted retail. And as a small company, you can leverage this approach as well. Another important factor is ensuring information is accurate and consistent. So complete regular audits to ensure you're telling the story you'd like. For instance, making sure that the information on your website is synced up with the information in your investor deck, going to all the downstream partners like Bloomberg or Yahoo! Finance, and making sure that, that information is set in a way that you feel comfortable. And if not, submit a request to have it changed. Talk to your team about OTC Markets and see what they can do as well. They have an investor portal that can be checked. You can also post a video message from the CEO, some research, among other things. So they can be a great resource for you in that regard as well. And updating investors regularly is also very important. So try to maintain these flow and provide additional pieces of information as you move throughout the year, really focusing on communicating your accomplishments, obviously, your partnerships and ultimately, your milestones, which will help investors connect the dots as news hits. So you want investors to be there and react. When a tree falls in the woods, there's someone there to hear it, basically. So this can be done through press releases, social media and thought leadership activities, which I'll talk about momentarily. These can all be used. And again, I think just keeping it simple and trying to relate to your audience. And then some additional considerations. Respond to every single inquiry you get from investors. You really never know who you're speaking with or what networks those investors have. And then try to leverage your network in conversations to understand who your investors invest alongside. Don't be afraid to ask an investor to speak with another investor if they're passionate about the business. And then maintain an investor list that should grow throughout time, and that's an important consideration as we move forward. Next slide, please. So social media is also important, as you can imagine. But you do need to alert investors which platform you'll be announcing news on. So you can do this in your press releases, your websites, disclaimers and presentations. But the SEC does require that you indicate which platforms you will be announcing news on, especially if it's considered material under Regulation FD. So first step, obviously, is build out all the social media channels to the fullest extent. There are a lot of resources online. Best practices, just making sure that your profile is complete. A lot of these platforms will tell you if it's 80% complete or 50% complete. But try to get it to a point where it's best in breed. And again, there are a lot of resources online. And when you post content, you can leverage cash takes. So I see a lot of companies actually not doing this. But for example, using one of our clients, for example, it'd be a dollar sign, MEEC. That's the ticker of the client. That hashtag will link directly to your ticker. So anyone who looks that up can see all news and posts related to that. And then look at other hot hashtags. So for example, #cleanenergy or #ESG. These are some very hot topics right now. And you can actually see how often these hashtags are being used. So wherever possible on social media, also try to use pictures or video rather than text. So text is fine, and we understand it is needed. But there are limited characters you can use in a lot of instances, but you also tend to get a higher engagement rate with pictures and video. It's easier to consume and share, and people are more interested. So another helpful consideration maybe along those lines, is the use of infographics or for complex ideas or things that require explanation. So you can accomplish a lot with an infographic versus writing it all out in explanation format. I think just staying away from promotion and sticking to either facts or opinion is fine. But ultimately, this is going to help protect the company and also help build credibility among your retail investor base. And then among some of these facts or opinion content really could just be thought leadership pieces, as I talked about. Some great examples of what you can post include white papers, describing a technology or an industry. Any press releases, pieces of media coverage or webcast should all be included on your social media pages regularly as well and posted in real time. Next slide, please. So I think webcasts are an awesome way to update and attract new retail investors. Usually, we're recommending that our clients webcast or update of some sort at a conference, an event, at an earnings call at least 1x per quarter. I think the beauty here is that anyone can join, right? So it's in the public domain. It covers all Regulation FD requirements. You could have your largest institutional investor join. You could have someone that owns 10 shares join, or really anyone within that subset of the market or even journalists or media. They can join to learn about new ideas and find stories to write. So one type of webcast that you can do on your own as a company, if you're not going to conferences, either paid conferences or invite-only conferences, is via earnings calls or what we'll call virtual road shows. But essentially, in a lot of ways the same, it is the company putting out a link in the public domain. You can do this via your website. More traditionally, it's done via press release, and it's typically announced in advance. We say typically 2 weeks, 1 to 2 weeks in advance is a really good amount of time to notify investors. But in some cases, it could be the very next day if you have relevant news to talk about, and you want to update the market. Now I know looking at research coverage as part of the domino effect spawn from MiFID II. Sell-side research is actually losing customers And as a result, reducing coverage. So looking at a FactSet study, roughly 19% of companies in the NASDAQ composite, stripping out SPACS, actually have no coverage at all. It is even less than half of that percentage for companies listed on the OTC exchange. So one way to really help solve this problem is via paid for research. Some will say paid for research is biased. And in some ways, it technically could be. The company is paying for research to be published. But the benefit here is that if you have a model in the public domain, the financial model that is, and something that's a great overview. So it's able to be shared with the masses. It provides that overview, an additional collateral marketing piece for new investors that you can distribute freely or have it live on your website, it actually can be a great tool. So if you think about most research from traditional banks, it is actually technically property of the banks. And you need permission to distribute that research. So paid for research is something that you have the liberty to do what you like with, and it can be a great marketing piece as long as you notified people, hey, this is paid for research. I think it's helpful to have something in the model and it provides an overview from a third party.

Just at this point, I just wanted to just mention to our audience that OTC markets has a portal in the premium provider directory, where we have vetted sponsored research providers. There's a multiple of them. Many of our companies do utilize the website. So if you are a QB or QX issuer, I'm sure you have communication with Cecelia or Bob, please reach out to them for additional services around that to heighten your awareness among investors. So I'll turn it back over to you, Greg.

Perfect. Yes. And I think just to wrap here on the research, it can be a helpful way to analyze value and help investors make an important decision. So we can head to the next slide. Sure. So thought leadership. You've heard me talk a little bit about this today. This is a really important topic and very useful in attracting new retail investors. So thought leadership, this is really about sharing new ideas and explaining how you, as management and as a company, fit into the broader picture of what people actually care about. So done correctly, investors should feel confident in the company they invest in and feel they need to get behind sort of that ultimate vision of what you're trying to do. So some examples of content are listed here. Original content, as I noted, such as white papers are great to be shared. We've seen clients successfully put a blog on sites such as medium to actually share ideas or on technology or just generally on the industry. And then on social media posts, which we discussed earlier as well. The company also shouldn't be afraid to comment on third-party articles or interviews. Being able to take content from someone else and provide your thoughts on it actually can be a very useful way to get people reading a different opinion or if you agree. Panel discussions can be an extremely helpful way to get intertwined with other thought leaders and in front of broader groups. So the squeaky wheel gets the grease here, I would encourage companies to reach out to conference or event organizers and just ask if there are speaking opportunities. Sometimes, there aren't and you may need to be actually just brainstorm with them to create a topic, but it can be a great addition to these events. So the organizers really like it because it provides them with thought leadership and shows that they're thinking about relevant topics. And sometimes, you may just need to find other companies at the event and suggest an idea, as I said. Probably the most effective and highest value of thought leadership content comes from financial media channels. So the biggest outlets, if you think about the Bloombergs, CNBCs or Reuters of the world. I mean a single article or video or interview can reach tens of millions in a single swipe, right? But other outlets exist too, such as ones that are industry-specific or even regional business journals or things like that. So giving content out into the public domain can be a huge leveraging component and I would highly encourage you to consider that. And I think finally, when conducting your webcast or earnings calls, as discussed earlier, just remember to use the public-facing opportunities you have to tell the broader story. So rather than just stating company facts, what you did in the quarter and who you are, help tell the audience what the problem is and how your company or product is the solution, right? And so -- and talk about some of the industry statistics that make the story so relevant today. So I'll give you an example. If you have a complex technology maybe that's a part in a phone and critical to the 5G network, talk about the network challenges today and how it's unable to scale without your technology. A step further could be talking about why that's important to the listener. So 5G is expected to have download speeds of more than 50x faster than 4G. For example, a movie that takes 29 minutes to download on 4G will take 34 seconds to download with 5G. Information like that is going to really allow people to say, wow, this is important to my regular daily life and my family. And I consume data, this is something I'm interested in. We can pop to the next slide, please. So now as I wrap up, just some final thoughts I wanted to leave at a high level from today's presentation. Keep the story simple and you will be rewarded in time. Retail investors tend to be much more comfortable investing in what they feel they understand. And they're also much more willing to talk to their networks about it. Take an approach to respond to every single inquiry. I think you never really know who you're speaking with on the other line. Use some of the thought leadership techniques we talked about to position yourself and the company in a positive light and create awareness, making sure that all company information is displayed accurately across all channels with no discrepancies. And that it's easily available. For instance, we talked about a website. Build out your social media channels and post regularly with cash tags and hashtags. Try to keep your audience -- or try to help them understand why they should care, meaning, again, how does it affect my daily life and my family's life. And then I think just keeping a consistent news flow to the extent possible. But a disclaimer here, do try to avoid fluff news that really doesn't tell any new information. So I'd encourage every single company to integrate these considerations as part of their IR program for retail investor engagement. And if needed, obviously, MZ Group is here to help and we'd love to talk with you. So with that, I'm happy to turn the call back to Andy.

Greg, that was fantastic. Thank you for the overview. For those of you who are joining us on the webinar, if you would like to post questions, you can post them in the right side in the chatbox. We are happy to take them. We have quite a lot of participants. As I see some questions that are coming in, let me start with one here. Greg, and I'll repeat the question twice. You mentioned the need to respond to every investor. What are some of the tools a management team can use to manage high volumes of requests? So I'll repeat again. You mentioned the need to respond to every investor. What are some of the tools a small management team can use to manage high volumes of requests?

Sure. Yes. No, it's a really good question. Ultimately, I think a lot of -- smaller companies tend to have thinner management teams as well. So really just having the whole house in order is probably your best asset. So I'll start with being diligent with your investor list and ensuring that all news distributed goes to these parties. So when a press release goes out, you want to be able to quickly push that information out so people can disseminate it and make an investment decision. As I said, momentum is a real thing. Typically pushing news out premarket is going to be more beneficial than post-market to generate some excitement. And so one way to manage your investor list is every time you meet someone, add them to the list. People can unsubscribe. As inbound e-mails come in, add them to the list. As people move firms, make sure that when you get those e-mails, adjust that list. Anyone that is on your webinars or your earnings calls. And if you get those lists, add them to your investor list. Create an FAQ on your website with some of the most common questions that you're getting and have that information available for anyone to look up. But then I would suggest actually expanding upon that FAQ a little bit further for internal use. So creating the top 40 questions you get, they could be as technical as you'd like. They could be as simple as you like, like who is your transfer agent. But having that completely built out, doing that onetime work and continuously adjusting it maybe quarterly is going to be important to you can basically easily copy, paste, slightly adjust the e-mail and send it out. So that's important, to get back to people quickly. You don't have different members of management giving different answers, and you obviously don't need to type out every single e-mail. Leveraging a full-service investor relations firm is obviously my top suggestion. I understand that it's not possible for all smaller companies, but that is also another way that you can kind of manage these high volume of call requests and email requests.

Okay. Thanks, Greg. I've got another one here, and this one relates to news flow. Any tips for managing the news flow, social media channels and keeping investors informed? I'll repeat again. Any tips for managing the news flow, social media channels and keeping investors informed?

Yes. So why I talked about being diligent with the investor list, that is probably the single most important one. And then earlier in the presentation, I mentioned having a sign-up form on your website. And then another tool for social media is that there are platforms out there that actually allow you to post content to multiple social channels at a given time, which can be a huge lever when taking into account all the steps needed to disseminate news.

Okay. Thanks. We're getting a lot of questions here. Here's one question, Greg, as you scan some of the other questions that are in chat box, how should a company approach the financial media as they consider telling their story? How should a company approach the financial media a tell their story? Greg, do you want to give some insight on that?

Yes. So I think rather than calling a journalist or an editor in pitching your company, as if you would pitch it to an investor, my advice would be trying to either focus on how the story fits into the broader scheme of things. So is there something thematic happening in the market that's heavy in the news flow? Or how does your company even maybe relate to a previous article that this editor posted? So a lot of these folks tend to write on specific industries, and relating back to clearly what they care about and what they're writing about and what their audience cares about is a really great tool. And probably the most effective way and high-value way to engage us maybe to even offer an embargo. If you have a major partnership or a major deal, you could offer exclusivity perhaps or the ability to write first piece or do the first interview. But I will say that typically, approaching editors or journalists about maybe 48 hours in advance is recommended. So that can present challenges if you don't have the press release completely locked in or you're waiting on a partner to approve it.

Okay. Here, we have another question as it relates to social media, Greg. The question is which social medias do you favor or does MZ favor or have found effective to use? Which social media does -- do you favor or prefer to use?

Yes. Just kind of thinking out loud. I mean, typically, we prefer Twitter and LinkedIn. Twitter just because of the size of the network. I know I mentioned some of the techniques that are more effective. Pictures and video are much more consumed and shared, specifically on Twitter. I think that's true across all social media platforms, but what we've seen is Twitter is probably the best for a picture and video. But I also tend to like LinkedIn. And the primary reason is because it really is a business resource and it's everyone within your network. So you should be constantly trying to build that out, invite people to your company page. If people look you up as a thought leader, they see you're associated with a specific company, they'll probably follow you. So just being diligent on posting your company news to either your personal page or the business page, I actually recommend both, is a huge value driver specifically for your network.

Thanks. Here we go. We've got another one. This one relates to ad campaigns. What are your thoughts about using paid campaigns or advertising on social targeted -- on social, targeting investors? Does it work? And how do you measure the ROI on that? So I'll try to repeat it again a little clearly. What are your thoughts about using paid campaigns and advertising on social targeted towards investors? Does it work? How does one measure the ROI on that?

Yes. So there are a few different techniques that can be used. I've heard something as simple as boosting press releases or other content that you put out there can push it to different audiences. We have been able to measure that. There, again, are services that you can pay a nominal fee to actually measure the engagement rate and see if you're actually getting traction on that. A lot of times, there is a budget you put in and it uses as much as it can. But there are some restrictions for that. We've also had clients used platforms such as ProActive has one. Like Amplify. And there's a variety of others. Sometimes, that can actually be helpful to have paid social ads that go to landing pages and it's really just an information resource with a sign up, again, driving to that investor list or driving to your website, ultimately, which can be helpful. I will say, at times, it is rather difficult to measure the ROI. But I would encourage companies to give it a try initially and see what works for you because there are different industries that maybe respond or different companies that respond better towards these paid-for campaigns.

Thank you, Greg. That brings us towards the end of this great webinar that we've had today on initiating and attracting retail customers to your company's investment. Just a couple of takeaways that I have from this is leverage what you have with OTC markets. I made a comment earlier about utilizing the capabilities and the reach of OTC Markets website by utilizing and posting videos, updates, earnings updates, using the research portal to post sponsored research, leverage the premium provider directory to identify research providers who are all vetted and talk to them. Greg, the insights you've had are great around social, around developing plans and addressing some of the issues for management teams that are very stressed. I want to thank you for joining us. For all of you who are on the call, a copy of this webinar will be e-mailed to you and will be archived on our website probably within the next day or so. And if anybody has any questions, feel free to e-mail me or the team at OTC Markets about any questions. And Greg, thank you for participating, and we want to thank MZ. Thank you, Greg.

Yes. Thank you, Andy, and thank you for everyone joining.