The Assault on Small Cap IPOs

small cap IPOs

Our friend and fintech luminary Dara Albright has penned an important piece on Crowdfund Insider about the recent Reg A+ IPO of Chicken Soup for the Soul Entertainment, Inc. Sadly, the commentary outlines massive misreporting (a/k/a “fake news”) published by a prominent financial media outlet and written by an author half a world away in Bangalore, India.  It’s a very insightful read on the prejudices that small caps face, but makes the point that they are incredibly important financial investing tool, and also shares a chart showing how Adobe, Intel, e-Trade, Dell and even Microsoft could be considered to have been “small caps” when they did their IPOs.  As always, Dara has an important viewpoint that has to be reckoned with.  Great read.
(Cindy Taylor/Publisher)

“On Friday, August 18, 2017, Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) made IPO history by becoming the world’s largest Reg A+ IPO, raising $30M at a pre-money valuation of $120M, and the first Reg A+ to trade on the Nasdaq Global Market, Nasdaq’s top tier market.

The stock opened up strong, rising as much as 10.5% above its $12 IPO price to $13.26. However, as the day went on, the stock price began to wane – not because of fundamentals but on account of “misinformation” (some may even say, “fake news”), abusive shorting and algorithmic trading.

Fake News

Let’s start by addressing the erroneous news articles that incited the bears in the first place. About an hour and a half into trading, one well-respected financial media outlet published an article from a writer in Bangalore, India. The article, which originated on the other side of the planet, was shamefully ridden with so many inaccuracies that it required multiple corrections throughout the evening – leaving disinformation available for all to read throughout trading hours. While supposedly “corrected” by the news source, this misinformation will live eternally – in infamy – on the Internet. In effect, this rotten egg cannot be unscrambled.

Not only was the writer incapable of getting the symbol correct, Chicken Soup for the Soul Entertainment’s entire business model as well as its use of proceeds were utterly misreported.

Despite what was reported from Bangalore, a book publisher did not go public on August 18th.

Instead, what IPO’d was a disruptive media company capitalizing on the mega-trends that are affecting today’s entertainment industry, including the audience fragmentation, advances in technology, and increased “cord-cutting” (Think Netflix of inspirational programming).

Likening CSSE to a book publishing company is even worse than having had equated Microsoft (NASDAQ:MSFT) to a mainframe computer company when it made its public debut back in 1986….”

Full Story at CrowdfundInsider