The benefits of communicating directly with investee companies

When we invest risk capital in young enterprises, it’s important to read all the corporate news releases, financial summaries, and MD&A filings that time permits. If we don’t have the time, we shouldn’t be invested.

In my case, I relish the opportunity to meet face to face the CEOs of these entrepreneurially run companies. Zoom calls are good but not as much as meeting in person. Receiving the information via a virtual conference presentation that has Q&A is the next best and watching video clips is also a bit better than simply reading material filed with regulators. Professional analyst reports may or may not be helpful. If you know and have confidence in the analyst, and read their full report, then that is also good use of time. Near the bottom of the list is to read literature published by financial media, especially the headlines, and the worst information an investor can read is from amateurs in social media.

But, if you can connect with the CEO, and keep yourself objective, then you ought to achieve an awareness of the opportunities and threats involved in that investment. Trust me when I say there will always be threats, and you will always have a personal challenge in staying objective.

So the connection is the key, and by that, I mean a “two-way” street where there is give and take in any discussion. Investors should be learning, but also be able to give feedback.

This week I have had numerous phone calls and zoom calls with CEOs. In every case, I was pleased with the win-win experience.

In one call, I started with the complaints that (i) the company website was unquestionably the worst I can recall, (ii) the CEO was not on the Board of Directors, which I found dubious, and (iii) there was a feeling I had that the company was “Chinese”. Then I let the CEO speak and was told to expect the IPO and their initial exchange listing before the end of the month, and an investor relations team had just been hired where an entirely new website would be done. The China matter was put off with an explanation that the Company was not Chinese at all, but operating out of Belgium. Only at the end of the meeting did the US-based CEO tell me that the stock was almost entirely held by institutions that had invested $120 million and that CITIC, one of China’s largest conglomerates, held 25%, Bain Capital 5%, and two world-name chemical companies a further 25% between them. CITIC held one of three directorships — soon to be seven including the CEO — and that representative is also the Senior Managing Director of CITIC Capital and CIO of the industry-related investment fund. So, it’s wonderful when you can elicit so much information in a first-time zoom call with the person who runs an important company, and one that I will likely invest in after they go public.

In another call, I surprised the CEO of a mining company that is starting operations in a remote part of the far north of Canada by telling him I had a spy looking out for my interests. He responded that if only he could pick those who spy on him he’d hope it was me. So, I sent him the local regional advisory council transcript of the full meeting this CEO just held with the people in that region, signed off yesterday by my associate. The CEO was even more surprised as he responded: ” I am grateful for the help. You may not know that most investors don’t engage like you do. Seasoned management uses investor input as guideposts. So thank you and keep communicating.” I certainly didn’t tell him what else I learned!

I could go on, but you get the point that I relish meeting the people who make the decisions for the companies we invest in. It’s like this blog: I learn so much and I give so much. It’s a win-win. It’s what I have tried to do my whole life.

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