Working alongside hundreds of small cap and micro-cap Canadian companies the past couple decades, I notice that so many of our most valuable growth opportunities never make it outside the Canadian borders.
A large group of Companies frequently ignore the possibility of attracting foreign investors when formulating their investor relations programs, missing the factor that these can play an important role in the growth of an early stage listed company.
Foreign investors are also valuable participants in the overall Canadian equity market: TSX estimates that more than 40% of its trading activity originates outside of Canada and UK investors make up the second biggest pool of overseas investors after the US, according to the 2022 UNCTAD World Investment Report.
Foreign investors increased their net participation in Canadian securities by over CAD 12bn in June 2023 alone, according to Trading Economics, despite a tough economic climate.
How foreign investors can benefit small and micro-cap stocks
These numbers demonstrate that even under the current economic circumstances, there remains demand for Canadian assets from overseas.
Overseas investors can play a very valuable role for issuers, helping Canadian-listed companies diversify their investor bases. This means management teams do not have to rely too heavily on investors from one specific region. It helps to support a company’s stock price during times of volatility or economic recession.
Physical investor events and road shows outside Canada can also prove beneficial. Hundreds of Canadian companies visit Europe every year, meeting investors in the major regional financial capitals and attending investment events. Such road shows can also yield potential valuable strategic partnerships with local companies, potentially creating expansion opportunities. The right IR partners can also facilitate media coverage with international press.
Meeting investors in person overseas also provides valuable feedback for management, and a good gauge of investor sentiment.
How do you go about attracting foreign investors?
North American companies which head off abroad to raise capital need to be aware of the cultural differences that affect the investment communities in other parts of the world. Cultural differences can have a big impact on the overall success of an IR campaign, which often needs to be tailored to the appetites of the local investor community. Partnering with firms that specialise in regional IR and PR strategies can yield benefits.
Connecting with the foreign investors most likely to push the button
Foreign investors in North American stocks vary widely, from sovereign wealth funds all the way to retail investors. In 2023 the top five most popular stocks held by UK investors, for example, were all listed in North America. Foreign investors recognise that Canadian and US markets provide opportunities that simply do not exist in their home markets and are more used to diversifying their portfolios outside their home markets.
Taking just the mining sector for example, UK investors are known to be among the most adventurous when looking at mining opportunities in Africa. A Canadian-listed mining company with African opportunities is doing itself a disservice if it does not have a UK IR campaign.
Similarly, Middle East investors like opportunities with a strong real estate component. The Middle East – and not just the Gulf states – possesses a pool of active investors in equities who are keen to diversify across strong investment stories in North America.
In our experience, building a following overseas for a stock requires a consistent campaign that will engage investors over a period, and go beyond simple earnings statements. Companies often ignore the opportunity to share valuable educational information about their sector with investors through a trusted media partner, missing the chance to position the CEO as an expert and engage through education. They would do well to highlight important partnerships, sales initiatives or new strategic moves as items that might interest potential investors, both at home and abroad.
Story telling is an art as old as the hills but can still be neglected by companies that think investors just want to focus on numbers.
If you would like to find out how the Armchair Trader can help you meet your international investor relations goals, contact Julie Durant
