Financial Marketing and Investor Relations Spending in the Cannabis Industry
There is a somewhat broad characterization of all financial market communications as “paid stock promotion.” But financial marketing and investor relations are critical functions of the public issuer, and successful investors know what the differences are.
Publicly traded companies owe it to their shareholders – the ones who have already invested capital – to continuously attract new investors to replace the ones who wish to sell. It’s a legitimate function in any company that raises capital from the public. The important factor is that these expenditures are disclosed.
In the increasingly crowded cannabis industry, getting the attention of investors is very much a matter of “you get what you pay for.” The amount of traffic that can be driven toward any given content is directly correlated to how much money is spent on keyword, native, and banner advertising.
So it should come as no surprise that companies who are well capitalized are spending an appropriate percentage of capital raised on this type of financial marketing.
Some conflate financial marketing and investor relations, and erroneously lump them into the category of “paid stock promotion”.
If you’re not concerned with accuracy, that mis-categorization is of no real concern. Midas Letter affiliated marketing firm Global Financial Network Ltd., or GFN, is generally regarded as one of the most effective social media and content marketing firms in the world. They conduct large scale programs for the world’s biggest companies, and also smaller programs for smaller companies.
Either way, the content is credible and measured, and is always derived from publicly disclosed information.
You will never see a price target, performance prediction, or recommendation to buy.
The differences among financial marketing, investor relations, and paid stock promotion are as follows:
- Investor Relations is the function of providing customer service to existing shareholders, and providing information to investors who have expressed an interest in learning more about the company and its value proposition.
- Financial Marketing is the distribution of company information materials to the investing public through media. Audience traffic is then generated through various means of advertising.
- Paid Stock Promotion is the function of telling the investing public to buy the stock of a company, and trying to justify that with inflated and misleading statements that is not overtly authorized by the company.
The first two are critical functions that every public company must undertake, or else it will surely wallow in obscurity, under an anemic share price, which undermines its ability to raise capital to fund operations. Financial Marketing and Investor Relations budgets and programs must represent a proportionate segment of the company’s capital reserves. Otherwise, investors, who will see the expenditures in public disclosures, will abandon the company as quickly as they do when the company does not spend any money on marketing.
When Elon Musk of Tesla tweets out that he’s “taking the company private” and has the money to do so, that is bald-faced stock promotion, and should be prosecuted by regulators according to the law.
But allocating funds to financial communications conducted in a measured and reasonable fashion is not only legal and legitimate – it’s just good business.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
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