By Doug Poretz
I have a warning – a very serious heads-up – for all those who are part of the executive team of a publicly owned cannabis company: Do not let the tail wag the dog.
A company’s ultimate success will be the result of delivering clearly differentiated products or services at a competitive price with evident, preferably intuitive, value propositions for their customers. Whether a company is public or not has nothing to do with that. Nevertheless, I saw a number of companies at MJBizCon that bannered their stock symbol. You can see it in ads as well. I haven’t done a survey, but I think it is now fairly normal for publicly owned cannabis companies to give visibility to the fact that they are public. Even at a trade show where the focus is on selling products and services, not stock. Even though the fact that the company is public has nothing to do with increasing revenues, margins, client loyalty, and market share – you know: the things that in the final analysis define the company as a success or not and thereby translate into sustainable share price and enterprise valuation.
There are two basic points to my warning: 1) the fact that you are public is not part of your selling proposition; and 2) more importantly, worrying about the stock is a counter-productive no-win distraction.
First, as to the fact that being public has nothing to do with your selling proposition. Think back to the last time you went to buy a car. As you walked into the showroom you got hit with a lot of messages. Great mileage. New transmission technology. Safety. Design. But at no time did the people selling you the car say “we’re public.” Remember running into a 7-Eleven to get a quick snack? Would it really matter to you that the Mars candy company that makes the Snickers bar you are eyeballing is privately owned? When your hand reached for the Snickers bar, did you hold back a moment and think about anything other than eating it? There is a simple reason for why neither the car company nor the candy company promote whether they are public: the customer makes a buying decision based on what the product or service is going to do for them, and who owns the company has nothing to do with that. So: get rid of bannering the stock symbol as part of your selling effort. Put it into the “About Us” section because when people go there, they actually want to know things like whether you are public or not.
Most simply put: Don’t tell the customer all about you; tell the customer what you can do for them.
The second warning is the more consequential. Worrying about the share price diverts executive attention from building the company. That can permeate and make rotten an entire corporate culture. Plus, it exerts a negative impact on the share price because the more Management is distracted from operations, the less the growth of the company in quantitative terms. And the lower the growth, the lower the enterprise valuation. But the worst consequence of shining the spotlight on the fact that a company is public is the impact on the employees. It evidences that the Company is focused on something other than serving and growing their customers. If a drop in the Company’s share price provokes and dominates the general discussion more than the threat of the introduction of a new competitor, then the company has the wrong priorities. Put another way: then the company (and, ultimately the customers) has a serious problem. Period.
I know the case can be made, with some justification, that being public can translate into a benefit the customer values because it connotes greater staying power. And the case can also be made that greater visibility for the stock brings greater investor interest, which ultimately decreases the cost of capital for the company and rewards the investors with a high share price. I’ve made that case plenty of times in the course of my career. But in an emerging, “hot,” free-to-innovate industry such as this, being publicly owned can be over-emphasized and given too much importance. Bringing the right sensitivity to the issue, if and when it relates to you, is all that is required to make certain it never becomes a problem for you.
Remember this simple question: if promoting the stock has very little (if any) upside, and carries with it way too much risk, and if a stock symbol really will not sway a prospect’s decision to become a customer, why do it?
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