have seen a number of small caps with promising and seemingly...

have seen a number of small caps with promising and seemingly bulletproof prospects go to nil in my time $500-700m market caps to $10m or less or nil. It is not a sight you want to see and is bad for local equity markets generally.

when I think about it now the things I have consistently seen:

high directors fees, repeatedly justified as being necessary to retain top talent or incentivise progress

too many directors and executives for where the business was at

repeated missed deadlines

blaming external customers for playing hard ball / blaming the market for not embracing the product quickly enough

overconfidence in technological or geological / resource competitive advantage / moat

lots of name dropping / MOUs and relationships. A classic in the tech space for example is name dropping “Microsoft” or “aws”. Listing on a marketplace or becoming a partner is something tens of thousands of businesses do, but somehow it becomes an excuse for name dropping / ramper hype.

by contrast the things I look for are:

cash flow and increasing cash flow

scale / scalability, actual adoption of IP etc

tight register

insto support / T20s holding large % of the stock

healthy cash position eg 10% of market cap is cash or similar