Case Study 4: American Bio Medica Corp.
The Company:
American Bio Medica Corp. (NASDAQ: ABMC)
Strategy:
To get American Bio Medica Corp. listed on the Nasdaq SmallCap Market by introducing the Company to new investors and rallying existing shareholders in order to achieve full stock valuation. ABMC filed for a listing in March 1997, was denied in August 1997 and later appealed, then received conditional approval in mid-November 1997. In order to be eligible for an initial listing on the Nasdaq SmallCap Market, a company must have:
Either at least $4 million in net tangible assets, a market capitalization of $50 million, or $750,000 of net income in the latest fiscal year or two of the last three fiscal years
A minimum bid price of $4
A public float of at least 1 million with a minimum market value of $5 million
At least three market makers
At least 300 shareholders
Either an operating history of at least one year or a minimum market capitalization of $50 million
Corporate governance
The "Pitch":
Introduce ABMC to a new base of prospective investors as a high-growth company with a competitive product in an explosive industry, and reinforce support from existing shareholders by proactively communicating the Company's successful results.
Implementation:
NFN communicated the fundamental strengths of ABMC (i.e. competitive product advantages, seasoned management team, and aggressive sales and marketing campaign) as well as the explosive nature of its industry (on-site substance abuse testing). This was done through:
A 3,000 piece mailing to prequalified small-cap investors and active leads from trade shows which NFN and ABMC had attended.
Fax and email blasts to key members of the investment community and financial media.
Targeted advertising (run during the summer and fall of 1997) on investor-related websites, the Data Transmission Network (a national stock quotation network used by brokers and investors), television spots on American Medical Review and Five Star, and in magazines such as SmartMoney, Chiropractic Economics, Money Review, and Investor's Business Daily.
NFN communicated the expected benefits of a listing on the Nasdaq SmallCap Market to existing ABMC shareholders through phone networking and conference calls with the investment community.
NFN explained that the broader exposure achieved by the listing should facilitate efforts to attract new shareholders interested in long-term value. Expanding a company's shareholder base and capturing the interest of long-term investors typically results in the company's stock reaching full valuation.
Summary:
ABMC was approved for listing on the Nasdaq SmallCap Market on December 24, 1997. New shareholders were attracted to ABMC while existing shareholders demonstrated their commitment and belief in ABMC's growth prospects and fundamental strengths. The Company's stock reached $4.00 (the minimum stock price required for initial listing on the Nasdaq SmallCap Market) on November 17, 1997 (the same day the Company announced the conditional approval). ABMC stock continued to move, reaching a 52 week high of $6.50 on December 15, 1997 and leveling off around $5.00 per share in January 1998. Trading volume for the Company's stock also increased substantially to an average volume of 44,023 from July 1, 1997 to December 24, 1997, a 25% rise from the average volume for the comparable five months ended June 30, 1997.
Stock and volume charts which illustrate the successful achievement of the Nasdaq SmallCap Market listing and full stock valuation are on the reverse side.
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