It's a jungle out there. The whole world, not just the stock market, and definitely not just the small cap market, is a jungle. All manner of animals exist. Pretty, softly purring animals that you want to hug, walk the same streets with funnel-webs whose venom defies the notional tie between size and fatality. Skepticism is your ally. Corporate ethics have deteriorated to the point that empty shells can make it all the way to the Big Boards by virtue of common idiocy, epidemic indifference, and a system that makes "success" where success is so deemed. You want money, and so does everyone else. [For the sake of a point] imagine the financial world as a closed system. By doing so you realize that for every winner there is at least one loser. Not only should you have eyes in the back of your head, those eyes should have eyes. Lions purr.
Know what you own. Seems obvious, right? It's not. Corporate PR's do not tell you what you need to know. PR's tell you what the company wants you to know. Outside of Hollywood I cannot think of a more bastardized use of the idea of "Press" than your average press release. Get in the car, get on the phone, do something, but do not take anyone else's words or opinions as truth. Misinformation, disinformation, and lies are a social protocol not limited to small markets, remember that.
All common stock is the same, the companies are different. If you have ever read this blog before, you know that that mine did pay, and handsomely, but also that it was subsequently drubbed just like every other stock in the middle and late stages of 2008. Many purport that there exists some sort of safety in trading large cap names by citing market depth, analyst coverage, and other nonsense brainwashed into business schoolers from the day they show up. At least that what I tell myself. Realistically, though, the likelihood of payoff for development stage companies whether public or private is not good and market participants will blame markets for failing companies, rather than identifying true causes. Success and failure are determined by the quality of decisions and ethical bent of management.
When companies need capital common share holders take the pain first, and worst. Treat common stock not as the bottom totem, but as the dirt below the totem pole. Where common stock used to be thought of as the foundation on which successful enterprises were built, the creation of such wonderful devices as convertible preferred securities, PIPE deals, and Goldman's foray into the frontiers of a quasi-middle market means that when there's nowhere else to turn to backstop losses, share gaming will wring dollars out of unwitting participants. To dilute shareholders should be thought a last resort, that is not the case. Remain ever vigilant of the deal that threatens to water-down your stake.
When you feel like you're getting fucked, you are. There's a more PC way to frame this idea and it comes from the poker movie Rounders. Matt Damon's character Mike McDermott says, "Listen, heres the thing. If you can't spot the sucker in the first half hour at the table, then you are the sucker." When it's your money on the line, though, and you're the one in the chair, I advise dispensing with the politically correct, beating around the bush, candy-coating the obvious crap. What you do with the realization that you're getting fucked will determine how well you do in the markets, and in life.
Your money, your call.
