Hucksters like Jordan Belfort – made famous in The Wolf of Wall Street – and Jared Mitchell in 2015, one of Belfort’s disciples, convinced investors that microcap ForceField Energy was the future of LED technology, defrauding them out of hundreds of millions of dollars. However, like the Wild West, the microcap universe comes with incredible stock market opportunities with thousands of percent upside. For context, there are currently 101 companies in the U.S. that have a market cap of $50 billion or greater. Nearly half of them – 47 in total – once traded as microcaps and could have been bought when they were more than 50 times smaller. That means any of those 47 companies could have provided more than 5,000% upside for an investor. If investors could have confidence that microcap companies were not being fraudulent nor the management being outright thieves, there would be massive opportunities. When small companies become big, there’s incredible upside. These include Netflix (NFLX), Salesforce.com (CRM), American Tower (AMT), and Bookings Holdings (BKNG). Netflix was worth $115 million in 2002... it is now worth over $190 billion. If you’d invested $10,000 in Netflix in 2002, it would now be worth $16.5 million. So the opportunity is massive... as long as you can avoid being sold snake oil. The problem is that snake-oil microcaps
INCREDIBLE ECONOMIC OPPORTUNITY
Today, there’s a very similar land of economic opportunity... the land of microcap stocks is the modern “Wild West” for investors. It is largely an unpoliced expanse. It’s generally not worth it for the financial lawmen to roam this land. Out of all U.S. public companies with a market cap of more than $5 million, 70% are smaller than $1 billion... roughly 5,400 out of 7,600. Despite such large numbers, their market capitalization is a tiny sliver of the total investable size of the U.S. market. Those 5,400 companies make up only 3% of the total U.S. market capitalization. However, like the Wild West, the microcap universe comes with incredible stock market opportunities with thousands of percent upside. No wonder the U.S. Securities and Exchange Commission (“SEC”) has no time to fully police this space. The territory is too large and the dollar value too small for government officials to focus their time. Most investor wealth is far away from the Wild West of microcaps, and the enforcers’ focus is on protecting the bulk of U.S. investors. Because of this lack of government attention, the microcap land is filled with shady individuals looking for a quick buck to take advantage of investors.
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May 2020
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