Recyctec is currently on the Observation List. This is due to with a uncertain situation regarding funding. Personally, I am quite confident that their presence on the Observation List will be short. Soon the company then will prosper and the value of my investment will rise. How do I know? I don’t. Nevertheless, I am confident. Communication do that trick.
Communication is notoriously difficult
Often communication is a topic when it comes to smaller companies. On one hand, there are rules and regulations, requiring a certain level of information. On the other some investors seems to have far-reaching expectations. Reading different forums, it often strikes me that investors rather naïvely asks for details at a level that no company can or will give out. Prices as an example, or details on ongoing negotiations. Information that would never be asked from large cap companies.
This demand for information nevertheless meets the small companies. Companies cop quite differently to these demands. Often the demands collide with the fact that market communications is by no means is a core competence for most small companies. In a post some weeks ago, I analysed the communication from Dignitana and showed that their communication has raised more questions than it answered.
Communication is always two-faced and this goes both for humans and companies. In the core is of course the information you communicate. Around it is a second layer. This is what your communication makes you look like, when you communicate. And this is very difficult as it includes what you say, how you say it, what you do not say, to whom you say it, your wording etc. etc. Investor read the second layer, and then decides if a company is trustworthy. Some fail significantly others win.
Recyctec has improved significantly
Recyctec is an example of a company that have improved communication and are in process of changing the second layer. After a new CEO, Niklas Ekman, took over in July, the communications has significantly changed. In short, the prior communication of the company focused on what to come … a new product in two months, breakeven just around the corner, some hundred millions in turnover with a 30 % margin in a year or two etc. Again and again this clashed with the grim reality of the reports showing no turnover, no sales, and a yet another two-month production halt due to technical problems.
The current communication strategy seems rests on two line of communication. One is required market information via press releases and the other is up-dates. There have been a number of these up-dates since the new CEO took over. In July (financial goals), September (commercial update), two in October (revised financial goals and need for funding), and December (turnover in Q4). Along the updates comes of course the normal press releases. These are on the private placement and other topics on which the company has to inform the market.
The effect of the up-dates is that it gives investors extra information and calibrates their expectations. Judged as communication, it is quite effective as it is specific and informative but does not raise a line of new questions.
Communication before and after
If you want a striking example of the difference in communication, please read the two press releases concerning glycol for vehicles from June and October (in Swedish). They came out before and after the new CEO. The June-release takes the future perspective and announces a new product a month and a half later. Furthermore, it is unspecific as to what to expect, and the release talks of ongoing negotiations in Greece concerning sales in Southern Europe. The October-release takes the perspective of what is achieved, and are specific on what to expect (1 MSEK in turnover in 2018).
If a company communicates as the June-release exemplifies, it needs to follow up . Even if negations in Greece leads to nothing. This is a trap and offers a choice between bad and worse if negotiations leads to nothing! Either Recyctec can communicate a failure (investor confidence shrink) or they can they can keep quiet (investor confidence shrink). Either way they lose by offering this type of communication. Recyctec repeatedly chose the last option (kept quiet) and the price was that they were perceived as ‘all talk and no action’ by the investors.
What you communication makes you look like
Now we are back where we started. Confidence and what you communication makes you look like. I am confident that Recyctec will soon leave the Observation List and the value of my investment will rise. Of course, I could be wrong, but the company has a far more convincing communication than before. I take that as a token of a better run business. By focusing on actual achievements instead of what might, perhaps happen in the future, they will slowly regain investor confidence.