One leads to the other, of course!
August 27, 2011
Yesterday morning, with a skip through Calgary, I landed the redeye home from Vancouver. Seated beside me on the first leg was a clearly anxious young man, fidgeting about himself, adjusting his seatbelt several times, gazing out the window and around the cabin. Couldn’t decide whether to place his knapsack up or down, eventually passing it through me to the overhead compartment. With thanks, he introduced himself as Jake and small talk ensued for a few minutes, to be interrupted by a phone call from home. “Yes, Dad. Yes, Dad. Yes Mom. I love you, too, Dad. I love you, too, Mom. No, no… don’t put the girls on. Oh, okay… yes, yes, I love you, too, Sis. I love you, too. Right. Yes, Mom. I love you, too. Yes, Dad. I’ll call you when we’ve landed safely in Calgary. I love you, too, Dad. Talk to you soon. Bye.”
Stop now, and be truthful. Doesn’t that bring a smile to your face? If not, you’re dead and beyond hope. This, my friends, is what it’s all about. It doesn’t get any better than this. A fully engaged family, a loving family feeling separation anxiety just one hour after dropping their baby at the airport. You see, Jake was off to embark on his new adventure at university in Montreal. With indeterminate plans to study a little of this and a little of that, he was correct, and I told him so, when he declared, “anything can happen.” My encouragement to him in response was to fully embrace that wide potential. “Keep every door open as long as you can, stay engaged, and have a blast.”
True to his word, within seconds of touching down in Calgary, one hour and five minutes later, Jake called home on his brand new cell phone. “Yes, I’m still fine, Dad… turn your computer on. I’ll Skype you when I get inside.” Can you beat this? It’s just wonderful, I say. Or maybe I’m just getting old and soft.
My brief encounter with Jake was a bonus for me on this short trip. With just one business meeting set for Thursday morning, I needed to fly in on Wednesday. Feeling a bit like Jack Nicholson being called to Washington for the trial in “A Few Good Men”, I decided to make the best of it and engage in as many places as I could. Engagement really is everything.
As it turned out, the best flight options had me coming into Vancouver around Noon on Wednesday and not leaving until 9:30 p.m. on Thursday. Way too much down time for me. It’s not unusual to fly West in the early morning, have a meeting in the afternoon, and to be home for breakfast the next day. Not so lucky this time.
No problem. Straight from the airport on Wednesday, I enjoyed a light lunch with Celeste Curran and Rhylin Bailie and had the chance to meet with Rhylin in her office and gather a bit of a frame as to where she’s at vis à vis moving Southern Arc on to the radar screen for potential new investors. I’m encouraged, and look forward to seeing her plan roll out in full force.
Next on my agenda for this trip, and by far Number One, was to connect with my elder daughter, who is working toward her Master’s at UBC and engaged to be married (Ouch! I am getting old.) next summer. We enjoyed a wonderful visit Wednesday evening, including a walk along the Seawall. We didn’t cover the entire 22 km of its length, but enough of it for me to feel the steep climb back up to West Broadway, after dinner with her fiancé on Granville Island.
Thursday, after the conclusion of my meeting, I spent much of the early afternoon on the phone before meeting up with Jim McKeown and Ed Goertzen, both long time shareholders of Southern Arc, for a very enjoyable visit in the fishing village of Steveston.
The funny thing about all of this is that it blends in so well with a recurring theme in my business. As a consultant to private schools, so much of my work leads to discussion about engagement. Engagement is everything… for everybody… every day… in every way you can imagine. Kids who are enthusiastically engaged in out-of-classroom activities. Teachers who are engaged as mentors to students. Parents who are actively engaged in their children’s lives (ref. Jake, above, as a premier example). Alumni who stay in touch with former classmates and faculty. Cradle to grave relationships are formed and maintained to the benefit of all involved.
We are the sum of how we’ve touched others, and should exploit every opportunity to do so. Never knowing where these exchanges can lead, as Jake says, “anything can happen.”
Regularly, I recommend to schools that, to the extent they can tolerate volunteers, they should encourage this engagement. I say tolerate because the management of this effort is not without its price. It does take time and energy, but when properly managed, the benefits far outweigh the effort. Sense of community is one of the greatest strengths in binding people with a common interest.
Bear with me now, folks. There is method to this madness and it does all tie together.
Both Jim and Ed have been Southern Arc shareholders longer than I. In fact, Ed was a financier of the predecessor company, Sunda Mining, dating back to 2003. He’s been a quiet shareholder, knowing what’s there and biding his time. Eyes on the prize, he’s unaffected by the ups and downs.
Just as an aside, I would share a part of our dinner conversation. Ed mentioned an interest in hearing how I came to my price target for Southern Arc – in the multiple tens of dollars. My answer came in a series of questions to him, after which, from his own answers, he concluded that my estimate may be far too low. Time will tell, of course.
Jim also doesn’t say much, happy to accumulate where opportunity presents, and confident that his money is well placed. I’ve known both for more than three years. Jim and Ed are just two of the many people I’ve met through my investment in Southern Arc and I’m grateful to call them my friends. I know, I know. We all came here to make money. This is true but I say, while we wait for this to happen, I’m becoming rich beyond description, every step of the way, in the many dozens of new friendships I’ve formed.
So what? What’s the point? Well, I’m a thousand words into this piece, so I guess now would be a good time to get to the point.
Recently, I’ve been asked, “Why are all these people following so closely? If they’re not looking to sell tomorrow, why don’t they just file it away and wait?” Here’s the thing, and this is something discussed at length with Jim and Ed as we enjoyed the delicious offerings of Steveston Village, both edible and inedible. The Southern Arc retail shareholder group is a community like no other, and I do not use that word, ‘community’ lightly. I would defy any junior explorer on the Venture Exchange to match what has been created here from the bottom up, and embraced by management to the benefit of all.
This story began on an online forum (Stockhouse) four years ago. Online forums are generally a waste of time where nobody knows anyone else. Darts fly, and most leave. This next point is key. It’s a transient world where short-term investors play on one another’s emotions, pumping up and bashing down, everyone out to make a few pennies on the exchange. Anonymity enables this dog-eat-dog environment as people move from one stock to the next. No strings attached. No engagement. No relationships. No room for that kind of nonsense. This is about money, first and last. Make a buck and move on.
Perhaps because of the work I do, I didn’t see it that way. I saw the establishment of new interpersonal relationships as key, both to my learning and to my adding value to the conversation. Foolishly, I was told by many, I put my name out there. No anonymity for me. As I saw it, I wasn’t going to say anything I wouldn’t say to my own mother, so what’s the problem? Repeatedly, I was warned, there are too many crazy people out there. What if somebody goes ‘postal’ on you? Well, this is not something I’m going to lose any sleep over.
I should say that, in recent weeks, about 20 participants in the online forum have ‘come out’ identifying themselves by name, and abandoning the mask of anonymity. Many of these people, I already knew. I look forward to meeting many more of them. The quality of conversation can only rise.
Aside from the occasional wing nut, the benefits from this sacrifice of anonymity are too numerous to list here. Not only have I had the pleasure of meeting so many new friends. I’ve also been able to introduce many people to each other. At the same time, the Company has wisely capitalized on the opportunity to promote and support a sense of community among retail investors by staging regular shareholder meetings. These sessions are opportunities for people to meet both Company representatives and each other. This second point is not to be overlooked as it bears significant value. Such value manifests itself in a number of ways, including: the quality of conversation on the online forum; the multiple circles of conversation that have been developed and sustained offline (representing new levels of engagement, I’m sure never before seen in companies listed on this Exchange); and high shareholder understanding of this investment. All of this has enabled most people to maintain focus on the big picture, and not to be shaken off by the efforts of those who would toy with share price. This sense of community may not be a readily grasped selling feature for potential new investors, but there’s something here, not to be taken for granted.
On an hour’s notice, I can arrange a conference call with ten people (and have done so), not insiders, who control or hold direct influence over more than one-third of outstanding shares, pre-financing. I’ve met all of these people through the online forum. I suspect that another third of shares are controlled by regular readers of the forum, some of whom I have met, others yet unknown to me. This does not include insiders who hold another significant whack of shares. John Proust could hold an AGM in his kitchen and have 70% of shares represented, I am sure.
A newcomer to this stock would be in grave error by disregarding the goings on of the online forum. Noting the regular nonsense, familiarity with the underlying conversation, and awareness of the players who make regular contributions to this conversation, add great value to the taking of the pulse of the retail shareholder group. Such a tightly held stock represents both a strength and a potential weakness for this Company. Insofar as management stays closely in contact with this group, it is well protected in the event of unwelcome efforts to muscle in. At the same time, it is incumbent on management to stay closely in contact with retail shareholders, and to make sure that this dialogue remains open and, importantly, in two directions. Failure to do so would undoubtedly be disastrous.
I’m pleased to say that John Proust recognizes the high value in maintaining close relationships with retail shareholders, and has articulated this to me on numerous occasions. See my piece from December 7th last year on Relationships, followed by Connecting the Dots, this past June 22nd.
This relationship value shows itself in many ways. Steady hands on the ‘sell’ button in tough times. Steady hands on the ‘sell’ button in good times. Shareholders are holding for participation in the big win. Can’t tell you how many times I’ve heard this investment described as a potentially ‘life-changing experience’. In my business, I hear often that word-of-mouth is the best form of advertising. The same is true here. I would venture to say that the efforts of retail shareholders, over the past four years, have resulted in no less than tens of millions of shares being transferred into strong hands. This is a phenomenon not to be overlooked. Consider these relationships on yet another dimension. If and when John Proust et al are able to deliver on the potential life-changer known as Southern Arc Minerals, how many shareholders do you think will not answer the call for the next John Proust project? The opportunity for cross-pollination will not be missed, I’m sure.
So, why do these people watch Southern Arc so closely? First and foremost, these people are self-made, self-employed, detail-oriented control freaks… almost every one of them. They’ve made their money by understanding everything about their businesses. This formula is naturally being applied to their investment in Southern Arc. Many, if not most, are overweight in this stock, many way overweight. What they’ve learned tells them it’s the real deal. Over and over, they study their notes and re-read everything they’ve collected, in an effort to confirm and re-confirm their decision to invest in this Company.
So, why don’t they just let it ride? Well, here’s the crux of it. These are the people who, instead of bailing out when the market crashed in 2008, bought more… and more… and more. These are the people who carried this stock from a nickel back up to two dollars. They were convinced then, and remain convinced now, that this investment is going to pay off big. Without their enthusiasm in the open market, I am certain that the recent financing at $1.60 and the Qatari investment at $1.70 could not have been achieved. I am certain of this. I am sure John Proust feels the same.
These people had more shares than they needed two years ago, but couldn’t resist the fire sale prices. In recent weeks, it’s been the same people, digging deep into the couch cushions, and buying up shares, in the tens, some in the hundreds of thousands. Some are fortunate enough to find themselves still in a position to accept gifts being offered by unknowing short-term traders. One sent me a playful message this week (I think playful, as it was punctuated by a happy face), as follows: “Kevin, I bought 15,000 at $1.17 at the open. I hold you responsible.” When I countered for 3% of his ultimate winnings, he balked. Insert frown face here.
Most, however, are pretty much filled to the gills, and close to gagging on their holdings of SA shares. They’re not looking for opportunities to buy more. They’re not necessarily looking for opportunities to sell either, though some will naturally lighten up with rises in share price. What they’re looking for is a confirmation from outside this steadily fatiguing small group that they’ve made the right choice.
Here’s a small sampling from recent conversations. “Why is share price wallowing in its current range? When is it going to show signs that I’ve made the right choice? When are new eyes going to cast upon this ‘best kept secret’ in the world of junior explorers? If it’s such a great thing, where are these people? What’s it going to take and why is it taking so long? Is the market really wrong here? Enough is enough. Show me the money. I’ll hold, I’ll hold. Just show me a sign that I have not made a huge mistake. Patience is a virtue, but this is ridiculous.”
This is not your typical transient retail shareholder group on the Venture Exchange. Most have held this one longer than I, and I’m in for more than four years.
In the absence of long-awaited new eyes and fresh money in the open market, self-doubt and fatigue are sure to creep in. Let me say that, while admittedly a bit fatigued, I do not share this doubt, not in the least. At the same time, I feel for those who do, and look forward to concrete evidence in the coming weeks to support the decisions of many longstanding shareholders in support of this investment.
So, if there’s a message to Southern Arc management, an unnecessary reminder, I suspect, it is this:
To the extent that you can tolerate full engagement of the retail shareholder group, I would encourage you to embrace it as an opportunity unlike any other. This constituency has been key to successes enjoyed by the Company to date, and I expect, will continue to play a critical role as the story continues to unfold. Think: Not transient, but a longstanding valuable part of the SA team. Engagement IS everything.
Albert Einstein once said, “Strive not to be a success, but rather to be of value.”
One leads to the other, of course!
I hope this adds value for you.
Kevin Graham