Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals

Small Cap Gold Stocks Need a Primary US Listing

I care about:  the price of gold, the properties, the geologists’ reports, and what management has to say.  I’ll look at the website, read the press releases and stay current on the analysts’ reports.  But, should I give a second thought to where a company is traded?   In today’s markets, many small cap mining companies need help – and the benefits of trading on a primary US exchange can be critical to their survival and success.  If a company is spending all that time and money on being public in the US, I want to know that they are taking advantage of every benefit.

Benefit 1 – VALIDATION

A mining company with a NADAQ or Amex listed passed SEC inspection, typically through a 20F filing.  The company would have been required to not only provide all required information but respond to any questions or comments that the SEC might have, before that filing would be declared effective.  Post effectiveness, the company would have then had to submit a preliminary listing application to NASDQ/Amex, typically a several month process, in which they would have been required to respond to any inquiries and also submit their officers, directors and significant shareholders to background checks.

The primary listing offers investors comfort that the company survived this due-diligence process and continues to satisfy on-going filing requirements.  This VALIDATION can assist the company in attracting investors, employees, clients, and even joint venture partners or acquisition targets.

Benefit 2 – IMPROVED LIQUIDITY/VOLATILITY/SHORT-SELLING

Mining is cyclical and so more vulnerable to trading inefficiencies than many other sectors.   Illiquidity/Volatility/Shorting plague many small cap companies, but can be even more problematic for mining companies.  As previously addressed the VALIDATION should attract new investors and build trading volume.  More importantly, increased regulation of trading in a NASDAQ/Amex can enhance liquidity, limit volatility and discourage short-selling.  Ideally, the listed company would partner with Specialist/Market Maker to address any trading inefficiencies.  Many Specialists/Market Makers can and do take significant positions in their portfolio companies.  Companies just need to be sure that they select /attract the right Specialist or Market Maker.  

Benefit 3 – USING STOCK AS A CURRENCY

No guarantees here.  However, building shareholder distribution, increasing trading volume, and decreasing volatility would certainly help get you closer to being able to use the stock as an alternative to cash.

All companies should know what they need to qualify for listing on a primary exchange (www.nasdaq.com or www.amex.com) and have some reasonable plan to start meeting those standards.  Many of the requirements can take time to satisfy:  identifying/recruiting independent board members, obtaining a clean audit opinion, building a US shareholder base of 400.   When the opportunity to list is available, companies must be ready.  If a company waits  for a falling share price, a failed raise, or broken deal to start the process, they will probably miss the opportunity to list – just when they need it most.