In September, boutique investment bank Cruttenden Roth, in Newport Beach, Calif., announced it had taken a majority stake in the online news organization Redchip Review to help bring its stock-underwriting capabilities to the Net. Nothing unusual there: everyone from Merrill Lynch to Chase Manhattan Bank has been gobbling up smaller players to help them establish an interactive Web presence. Cruttenden Roth, however, dared to venture into the tepid waters of the microcap world, with the aim of bringing more awareness and capital to a relatively neglected stock sector.
For some time, Redchip Review has nurtured a reputation as the premier clearinghouse for information on micro- and small-cap issues. By buying into Redchip, Cruttenden Roth hopes to bring more cash to this slumping market sector. "When we bring these issues online, we'll bring a much larger audience to these stocks," says Douglas Sherk, CEO of Redchip Partners, the corporate services division of the new Portland, Ore.-based company, Redchip.com.
According to Sherk, Redchip Review already has 17,000 weekly visitors to its Web site, as well as about 2,500 subscribers for its paper- based sister publication. That audience breaks out into three groups: independent investors, portfolio managers, and stockbrokers. With the relaunch of the current Web site this fall, Redchip intends to offer ready access to small- company IPOs, secondary offerings, and direct stock purchase plans. Sherk believes this can only mean more capital for the floundering small- and microcap market.
Only time will tell if he is right. There's little doubt, however, that these fledgling companies rarely make it onto investors' radar screens. "Most brokers won't even consider bulletin board stocks, because they can't make a commission on them," says Donald Visco, president of Strategic Investors Group, an investor relations firm in Fort Lauderdale, Fla., that serves these undervalued ventures. "But microcap businesses feed the big guys."