One of the recurrent themes of our recent shareholder survey was “make it easier to trade our stock”. Like too many things, the answer as to how to do that has many components. Some background is in order. Because we’re SEC-regulated, lots of these words have very special meanings. Please forgive me if I sound too specific or like I’m reading from a dictionary.
The conundrum: Being listed will help make it easier to trade RWRDP. Being listed is really expensive. Being listed will help us become more valuable. Until we become more valuable, it’s hard to justify the expense of being listed.
One way to make trading RWRDP easier and better would be for it to be listed on an exchange.
Background: Our stock is “quoted” on the OTC market. The OTC market is NOT an “exchange”. NASDAQ and the NYSE (New York Stock Exchange) are exchanges. Moving from being quoted to being listed is called “uplisting”.
Some advantages of being exchange-listed:
- Stockbrokers could recommend our stock to their clients.
- Almost any stockbroker, especially the firms aiming for millennials (think Robinhood), would allow you to have our stock in your account. Today, the big guys allow it (like TD Ameritrade, Interactive Brokers, and Fidelity). In this case, more is definitely better.
- More interest from institutional investors.
- Potentially better liquidity (more shares trading mean it’s easier to buy or sell RWRDP).
- Potentially higher price for our stock (that would be one hoped-for result of more institutional investors and better liquidity).
- A more robust board of directors.
Some disadvantages of being exchange-listed:
- Lots more paperwork to comply with. For instance, quarterly financial statements, instead of every six months.
- A PCAOB audit (Public Company Accounting Oversight Board), instead of GAAP audit. That alone may double the cost of our annual accounting audits.
- Way more rules. Which means we’d have to have a full-time CFO and more staff instead of part-time staff.
- The exchanges charge about $50,000 a year MORE than it costs us to be quoted on the OTCQB.
- The cost of a robust board of directors.
- All of which make it way, way more expensive. Multiple hundreds of thousands of dollars more expensive, each and every year. Money we could spend on getting bigger and more valuable.
There are significant additional hurdles to being exchange-listed:
- We would need to raise a lot of money just to be qualified to be exchange-listed. The exchanges have minimums we don’t yet come close to meeting.
- To stay exchange-listed we’d either need to keep a lot of money in the bank sort of doing nothing, or become very profitable from an accounting perspective. Because the cost of issuing stock to our members causes us to be unprofitable this may be a real issue. Remember that for iConsumer, we may generate lots of cash even though our financial statements say we’re unprofitable.
- The fact that we issue stock to members for shopping, etc. actually makes it harder to get listed, because we’re the first to issue shares as an incentive, and the exchanges would have to figure out if this is a good thing or a bad thing. Eventually they’d get it, but helping them get to that realization will take time and money.
Another way to make it easier would be to reduce the cost of issuing and transferring shares.
- Transferring shares isn’t particularly hard. It’s one button on our site. And if you’re ready to sell, it’s sending some paperwork to the brokerage firm you’re using. It’s unlikely we’re going to be able to simplify that in the near future.
- The cost of doing the transfer if you only have a small number of shares is onerous. We’re looking at ways to reduce that. One way would be for us to have a deal with a stockbroker. That won’t happen until our shares are worth more. And that’s basically going to be a function of growth and profitability. Which puts it squarely on the shoulders of our members.
- Another point to make. We think of iConsumer as a long-term investment. While you “can” sell your shares, we think that part of the experience in being an investor in an early stage company is remaining an investor until later stages. Obviously we hope, but we can’t promise, that holding will also be a good investment.
Our conclusion is that we should get ready to uplist as soon as is reasonable and do nothing that would make uplisting harder. For instance, our internal accounting methodology should be able to pass a PCAOB audit today, even though that’s not currently required. We should be talking to prospective independent board members, even though we don’t need them yet.
We’ve engaged an IR firm (Investor Relations) to help us navigate these waters, which includes talking to prospective investors who would be interested in backing the uplisting process.