Tales From The MicroCap Crypt

The microcap space is filled with bad management teams, and over the years as an active investor I’ve witnessed and experienced interesting behaviors from company officers.  As part of my due diligence, I visit quite a few companies and meet with their management teams 1×1. I used to make it a point to stay an extra night to get the CEO-CFO to go out to dinner with me. The purpose of this dinner was to let them come out of their corporate shells a bit which would give me greater insight into the company. With some dinners, I’ve purposefully tried to grease the wheels a bit with alcohol to get them to open up to see their true character traits. Some management teams would completely restrain from alcohol and others would get ragingly drunk. I will not mention any companies or officers because some of them still exist, but here are just a few of the entertaining things I’ve witnessed at these dinners:

• “Service! Service! Service!” was screamed by a CEO along with his hand in the air to draw attention from the waiter at a Ruth Chris Steakhouse. The CEO was ready to order and wanted to immediately order. The whole restaurant stopped. It was one of the most horrifying yet hilarious experiences I’ve had.
• “Two of everything!” was screamed out when I was at dinner with a CEO when he could not decide on an appetizer. There were just two of us. They did in fact bring two of everything.
• “Guess how I bought this Porsche?” a CEO asked me, and after he told me, I realized I really didn’t want to know the answer.
• “The auditors are really good friends of mine” was told to me quite a few times which I never quite understood why they would think I wanted to hear that.
• “How would investors react if I sold some shares?”, not exactly awe inspiring when meeting the management team for the first time.
• “Goldman Sachs wants to do a deal with us”, on quite a few occasions this exact phrase was used which I quickly reminded them. “No they don’t”.
• “I think we can double revenues every year”, the CEO says, and I say, “Oh you mean like the next couple years”, and the CEO says, “No I mean forever”, and I just say, “well that would be something”.
• “Well the board just believes a forward split is in the best interests of shareholders”, says a CEO of a 75c stock. That is all I needed to hear.

These are just a few stories of a books worth of experiences I’ve had meeting with microcap management teams. I’m sure you all have your own, so feel free to share them in the comments section.

Here is a post I wrote a year ago, 8 Habits Of Highly Effective MicroCap CEOs, that goes into detail on what I believe is important in microcap leaders.

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