Latest / WTR Small-Cap Spotlight / WTR Insights Conference Featured Speaker: Joseph Lucosky of Lucosky Brookman on Getting Listed and Staying Listed in 2026

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WTR Insights Conference Featured Speaker: Joseph Lucosky of Lucosky Brookman on Getting Listed and Staying Listed in 2026 · WTR Small-Cap Spotlight

• 0:01
  SPEAKER_00: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_00: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_00: Today I'm pleased to welcome my co-founder and WTR CEO, Sean Severson.
• 0:15
  SPEAKER_00: Hello, everyone.
• 0:15
  SPEAKER_01: My name is Sean Severson, CEO and founding partner of Water Tower Research.
• 0:20
  SPEAKER_01: Very excited to have our featured speaker today during our conference, Joe Likoski, and we're going to be talking about emerging growth markets, getting listed and staying listed in 2026.
• 0:30
  SPEAKER_01: Certainly a topic that's very important to not only the corporates, but uh investors as well.
• 0:35
  SPEAKER_01: Lots going on there.
• 0:36
  SPEAKER_01: So, Joe, I'll just have you quickly uh introduce yourself first and then we'll we'll jump into a couple items.
• 0:43
  SPEAKER_02: Yeah, thank you, uh Sean.
• 0:44
  SPEAKER_02: Thank you for having me and uh welcome everybody.
• 0:46
  SPEAKER_02: So my name is Joseph Lakoskey and I'm the managing partner of Lakoski Brookman.
• 0:51
  SPEAKER_02: And um we are very hyper-focused as a law firm in the emerging growth and microcap space.
• 0:57
  SPEAKER_02: In fact, I spend most of my days uh in the trenches talking to the exchanges, both NASDAQ and the New York Stock Exchange.
• 1:04
  SPEAKER_02: I also spend my days uh talking to issuers and investment bankers and really every type of capital market participant that is super focused in the emerging growth space.
• 1:16
  SPEAKER_01: And along those lines, you were recently appointed to a committee um that's uh that's right in the right in the middle of this.
• 1:22
  SPEAKER_01: Can you can you tell our investors and and companies a little bit about that?
• 1:25
  SPEAKER_02: Yeah, it was it was a great honor and uh very exciting.
• 1:28
  SPEAKER_02: So uh I was appointed by Commissioner Atkins to the Small Business Capital Formation Advisory Committee that meets um periodically down in Washington and advises the actual commissioners and the staff at the SEC on really all things emerging growth from capital formation initiatives to reporting requirements, disclosure obligations, and really everything in between.
• 1:50
  SPEAKER_02: And it's been a very, very exciting time working with that committee.
• 1:54
  SPEAKER_02: And there's about 15 of us.
• 1:55
  SPEAKER_02: We go down to Washington to meet with the commissioners periodically.
• 1:58
  SPEAKER_02: And as you know, and a lot of your investors know, you know, the administration has really put forth a lot of good capital formation reforms that will make it easier to raise capital, uh, make it uh a lower cost to kind of stay public and get public, reduce some of the burdensome regulations.
• 2:16
  SPEAKER_02: Now, all of that is in proposal form, and I'm looking forward to seeing how this all plays out on this committee and with the commissioners over the next uh, you know, one or two quarters.
• 2:27
  SPEAKER_01: You know, it's interesting because this entire topic often gets overlooked, but you know, the cost of capital and how important it is to investors and companies when it comes to small and microcap companies, you know, they they have certainly have different struggles than um you know than other companies, uh larger companies do in the mix here.
• 2:45
  SPEAKER_01: What are some of the um you know the the ways that they're addressing this?
• 2:49
  SPEAKER_01: I know there are you know you can do direct listing, IPOs, up listings.
• 2:54
  SPEAKER_01: How is that broken out this year uh as you've seen it?
• 2:58
  SPEAKER_02: Well, listen, this has been a um uh one of the most fascinating years of I think the emerging growth space.
• 3:05
  SPEAKER_02: And and partly, I think, just stepping back for a second, remember, we are a law firm that's hyper-focused in all things direct listings, up listings, IPOs, cross listings, all types of you know, periodic reporting, but we also track data.
• 3:18
  SPEAKER_02: And that's the important point here.
• 3:20
  SPEAKER_02: We track all of those types of deals because the most of the big information uh publishers don't do that.
• 3:26
  SPEAKER_02: So anything with a day one market cap of 300 million or below, we track, we analyze it, we curate it, we put it out for the industry to use.
• 3:34
  SPEAKER_02: We don't gatekeep it, we don't sell it.
• 3:36
  SPEAKER_02: We really try to um give it out so the industry can use it to maybe make better decisions and to elevate, you know, as a whole.
• 3:44
  SPEAKER_02: But I'll tell you the reason why 2026 has been so uh interesting and exciting is because obviously NASDAQ uh put in new rules in December 2025, which makes this whole process a discretionary process now.
• 4:00
  SPEAKER_02: What that has turned into is a bigger mix of alternative pathways.
• 4:04
  SPEAKER_02: And this is the first year on record where the direct listings and the up listings have outpaced the traditional IPO, and that is significant for so many reasons.
• 4:14
  SPEAKER_02: So through August 31st, uh our Lakoskey Brookman Data Desk has tracked 51 microcap transactions.
• 4:22
  SPEAKER_02: And that breakdown like this, Sean, 17 IPOs, 17 direct listings, and 17 up listings.
• 4:29
  SPEAKER_02: And this again is the first time where the alternative pathways are 34 transactions to 17 traditional IPOs.
• 4:36
  SPEAKER_02: That has never happened.
• 4:38
  SPEAKER_02: It has always been the reverse by a multiple.
• 4:40
  SPEAKER_02: So the new rules that went into effect are really affecting how the microcap and emerging uh markets do transactions, and most importantly, what type of transactions they are doing.
• 4:52
  SPEAKER_01: Well, with those numbers, it's hard, you know, to even call them alternative anymore in terms of the of getting listed.
• 4:59
  SPEAKER_02: Well we ask that question all the time.
• 5:00
  SPEAKER_02: We say, when does the alternative become the new normal?
• 5:03
  SPEAKER_02: And when does the old normal become, you know, the alternative or the exception to the rule?
• 5:07
  SPEAKER_02: I don't think we're there yet, though.
• 5:08
  SPEAKER_02: I really do think that the exchanges are finding their way through the process.
• 5:13
  SPEAKER_02: Look, they are also trying to understand the rules and how to implement them in a fair way and a more efficient way.
• 5:20
  SPEAKER_02: Because remember, for the first 78 days of the year, there were no microcap IPOs.
• 5:27
  SPEAKER_02: Literally zero.
• 5:28
  SPEAKER_02: It was, you know, the second pause, as we call it.
• 5:31
  SPEAKER_02: The first one was in uh August 2022.
• 5:34
  SPEAKER_02: This one came in the end of December, early January 26.
• 5:38
  SPEAKER_02: And for 78 days, there wasn't one microcap IPO because NASDAQ was trying to figure out how to implement these new discretionary rules.
• 5:46
  SPEAKER_02: And I do think that as time goes on, uh, especially here in the third quarter and the fourth quarter, we are going to see that open up a little bit.
• 5:53
  SPEAKER_02: Now, are we going to catch up where the traditional IPOs outpace the alternatives?
• 5:57
  SPEAKER_02: I think that's a foregone conclusion for 2026.
• 6:00
  SPEAKER_02: But I am hopeful as the exchanges get more uh comfortable with the rules, we will see that formula start to flip a little bit back to what you and I would, you know, traditionally expect in the emerging growth market.
• 6:13
  SPEAKER_01: Going back to the uh the idea of the traditional IPO for small and microcap companies, what is it about that that is, you know, I guess difficult for them?
• 6:23
  SPEAKER_01: Or is it is it uh trying to understand the process of of why why this changed happened, you know, why didn't they go more of the traditional route?
• 6:32
  SPEAKER_01: And what do you think needs to happen to bring it back to where we see more traditional IPOs?
• 6:36
  SPEAKER_01: Because you kind of mentioned we're we they should start to even out a little bit, uh, you know, getting back to normal structure, but why is that?
• 6:43
  SPEAKER_02: Well, look, I think again, NASDAQ and the New York Stock Exchange, historically for the past couple years, have been figuring out ways to make it more difficult to list and more difficult to stay listed.
• 6:54
  SPEAKER_02: This all started in September 2024 when the New York Stock Exchange implemented the$10 million gross proceeds rule, which was really a shock to the industry.
• 7:03
  SPEAKER_02: Basically saying that if you were a microcap company, you had to raise at least$10 million, even if you qualified other ways.
• 7:10
  SPEAKER_02: Then Nasdaq followed with a$15 million rule.
• 7:13
  SPEAKER_02: And then, you know, various other rules came about in 2025, mainly because of the volatility that was happening with Asian companies that were listing here in the United States.
• 7:23
  SPEAKER_02: The volatility was all over the board.
• 7:25
  SPEAKER_02: The SEC and NASDAQ got together and said we can't have this.
• 7:28
  SPEAKER_02: They raised the Chinese company proceeds rule to$25 million.
• 7:33
  SPEAKER_02: So we went from 10 to 15 now to 25.
• 7:36
  SPEAKER_02: And then in December 2025, NASDAQ dropped the big discretionary bomb.
• 7:42
  SPEAKER_02: And that's important background because what that did was systematically change the market, how the market uh conducts transactions, what structures are available, and most importantly, the behaviors of the market participants.
• 7:57
  SPEAKER_02: And what I mean by that is this in 2025, the foreign private issuer market accounted, according to our data, for about 82, 83% of all IPOs.
• 8:10
  SPEAKER_02: This year, that statistic is flipped on its head.
• 8:13
  SPEAKER_02: Domestic companies are leading the charge, at least on the IPO front, because NASDAQ is very wary of putting these foreign private issuers through the process, at least in a way that um, you know, uh resembled 2025 and 2024.
• 8:28
  SPEAKER_02: The discretionary rules are brutal.
• 8:30
  SPEAKER_02: They are looking at everything in and around the companies now, not just the companies themselves.
• 8:36
  SPEAKER_02: And here's the most important point, Sean.
• 8:39
  SPEAKER_02: The question no longer is do I qualify to list on the exchange?
• 8:44
  SPEAKER_02: The question has become: do I belong on the exchange?
• 8:48
  SPEAKER_02: And does the exchange want me to list on their platform?
• 8:52
  SPEAKER_02: That is really a very different question, and it has changed the behavior and the mindset of the market.
• 8:58
  SPEAKER_02: So no longer are we just checking boxes and sending in applications.
• 9:02
  SPEAKER_02: I mean, we never did that anyway.
• 9:03
  SPEAKER_02: We are the ultimate sort of leader and true quarterback of a transaction, but I know a lot of lawyers and consultants who are very, very out of favor right now because this has become a full contact sport.
• 9:13
  SPEAKER_02: It has become an advocacy-based process.
• 9:15
  SPEAKER_02: And the days of just checking boxes and submitting forms and applications and writing disclosures are long gone.
• 9:22
  SPEAKER_01: And so now the companies have to make their make their cause, right?
• 9:26
  SPEAKER_01: Justify or make really a, I think more like going to trial than for doing a process with the absolutely listen.
• 9:31
  SPEAKER_02: I was telling somebody the other day, John, I was telling somebody the other day, he said, you know, this is like a mini hearing.
• 9:37
  SPEAKER_02: It really is.
• 9:38
  SPEAKER_02: I mean, the back and forth.
• 9:39
  SPEAKER_02: You cannot just rely on a memo.
• 9:41
  SPEAKER_02: You cannot rely on an email.
• 9:42
  SPEAKER_02: Any lawyer, consultant, market participant that tells you, hey, we're just gonna submit an application and wait our turn, that is the old playbook.
• 9:49
  SPEAKER_02: That is going nowhere fast.
• 9:51
  SPEAKER_02: Like I like to say, this is a full context sport, and you have to literally be waking up every day and running to that finish line because getting a number in line, submitting an application, filling out a form, no longer, no longer gonna get you to the finish line.
• 10:06
  SPEAKER_01: So should companies still continue to fight for this in the small and microcap space?
• 10:12
  SPEAKER_01: I mean, lots of other good alternatives.
• 10:14
  SPEAKER_01: We discussed some of those.
• 10:15
  SPEAKER_01: I mean, what what is the positioning that you you really should fight for this IPO or should you use one of the alternative processes these days?
• 10:23
  SPEAKER_02: Yeah, so like I like to like I like to say is that you know you don't really choose your structure.
• 10:29
  SPEAKER_02: Your structure chooses you.
• 10:31
  SPEAKER_02: And what I mean by that is this private companies have two options.
• 10:35
  SPEAKER_02: You can do a traditional IPO or you can do a direct listing if you qualify.
• 10:39
  SPEAKER_02: And those are usually a different kind of company.
• 10:41
  SPEAKER_02: If you're traded on the OTC, your path is the up list.
• 10:45
  SPEAKER_02: If you're traded uh abroad or some foreign country, your path generally is the cross list.
• 10:52
  SPEAKER_02: So again, it's not like a company can choose one of the four pathways.
• 10:56
  SPEAKER_02: Your pathways really choose you based on where your company is in its current life cycle.
• 11:02
  SPEAKER_02: So private companies have uh a little bit of the most flexibility.
• 11:07
  SPEAKER_02: Again, the OTC companies must up list and the foreign companies must cross list.
• 11:11
  SPEAKER_02: Now there's certain exceptions.
• 11:12
  SPEAKER_02: You can, you know, I guess do a traditional um, you know, IPO if you're on the OTC, if you can't meet some of the certain exceptions.
• 11:21
  SPEAKER_02: Uh, but for the most part, your structure chooses you.
• 11:25
  SPEAKER_02: You don't choose your structure.
• 11:27
  SPEAKER_01: What do you think those parameters are that make the best IPO candidate?
• 11:31
  SPEAKER_01: Uh, you know, because I know companies and even investors are always curious about this.
• 11:35
  SPEAKER_01: What you know, what what companies make the best IPOs versus the direct listings and and the alternative uh alternative solutions?
• 11:43
  SPEAKER_02: Well, I'll tell you, I wish I knew the answer to that question because uh I'd be investing in these companies.
• 11:47
  SPEAKER_01: Yeah, you'd invest in right again.
• 11:49
  SPEAKER_02: It is uh it is a very tricky question.
• 11:50
  SPEAKER_02: But I'll tell you this.
• 11:52
  SPEAKER_02: What we see is the companies that tend to do the best for the longest.
• 11:56
  SPEAKER_02: I'm not saying they'll last forever or you know, there's a lot of execution risk with every deal, not just execution of the transaction itself, but execution of the business.
• 12:05
  SPEAKER_02: But the ones that we see are generally the ones that go into the process well prepared and well capitalized.
• 12:12
  SPEAKER_02: That doesn't mean you can't raise a bridge loan.
• 12:14
  SPEAKER_02: It doesn't mean you can't, you know, raise bigger money once you get on the exchange.
• 12:18
  SPEAKER_02: But you really need to have an amount of operating capital that gets you through a business plan at least for the first 12 to 18 months.
• 12:26
  SPEAKER_02: If you are going to the capital markets uh and barely squeaking by and then trying to raise all the capital you need in the public markets, that usually is a recipe for disaster.
• 12:38
  SPEAKER_02: Now, there are certainly exceptions, depending on the industry.
• 12:42
  SPEAKER_02: AI has been very hot, nuclear has been very hot, space has been, you know, a very exciting industry right now.
• 12:49
  SPEAKER_02: So certain industries are going to be the exception, but for the most part, we are seeing companies that are bigger, better capitalized, more prepared, going public on the domestic front.
• 13:02
  SPEAKER_02: And like I said, the foreign market has been really all but wiped away given the new discretionary rules.
• 13:08
  SPEAKER_01: And we see that a lot every day as analysts and investors in the space.
• 13:12
  SPEAKER_01: Companies coming out, they raise just enough capital to get by.
• 13:17
  SPEAKER_01: Everybody knows they're going to be back in the market shortly after that, right?
• 13:21
  SPEAKER_01: Which puts them right on the radar of when's the next capital raise?
• 13:24
  SPEAKER_01: They're undercapitalized.
• 13:25
  SPEAKER_01: And I think that's been a problem that is pervasive throughout the small cap and microcap industry is just getting enough capital, but not putting them in a position to succeed.
• 13:37
  SPEAKER_01: What are your views on that?
• 13:39
  SPEAKER_01: Um, you know, that I think you touched some of it already on what kinds of companies can can IPO, but you know, you see a lot of this.
• 13:46
  SPEAKER_01: What's your take on it?
• 13:48
  SPEAKER_02: Yeah, look, I think that um companies have to be well positioned, both capitalized and really have the right people around them.
• 13:54
  SPEAKER_02: You know, I see so many companies go public or raise capital, and then they come to us sort of late in the game without the right advisors, without the right sort of operating plan and capital raising plan, they think it's all gonna happen once they're public.
• 14:08
  SPEAKER_02: I am here to tell you that going public does not solve all of your problems.
• 14:12
  SPEAKER_02: It is not a magic bullet.
• 14:14
  SPEAKER_02: In fact, what it does is it exposes your problems in a very public way.
• 14:18
  SPEAKER_02: Whereas when you're private, you can at least deal with your issues in a private, uh, you know, um more a smaller setting.
• 14:25
  SPEAKER_02: If you go public for the wrong reasons and you're not as capitalized as you should be, or you're not as strong on the balance sheet.
• 14:32
  SPEAKER_02: And I'm not saying you have to be massive.
• 14:33
  SPEAKER_02: That's the whole point of the emerging growth and microcap world, where we support entrepreneurs and we support founders who have a growth business that want to go raise that capital.
• 14:42
  SPEAKER_02: But I'm talking about really undercapitalized company.
• 14:45
  SPEAKER_02: That is a bad idea because all going public is going to do is create more problems and shine a big, bright spotlight on those problems.
• 14:53
  SPEAKER_02: You might as well stay private and continue to grow your business, even though capital raising is difficult, and then come back to the markets when you're a little bit stronger, a little bit bigger, and and better situated to handle um you know being public and having such a bright spotlight uh shine upon your company.
• 15:12
  SPEAKER_01: Does that the do the same uh does the same process hold for direct listings, for example, or are there nuances that make uh that a better listing for certain companies?
• 15:21
  SPEAKER_01: I mean, obviously there are a lot of reasons companies want to be public, right?
• 15:25
  SPEAKER_01: So if they if they do do this, I think they they need to understand the paths that fit them the best.
• 15:32
  SPEAKER_01: What is it in a direct listing that would be the right the right reasons to do a direct listing?
• 15:37
  SPEAKER_02: So direct listings are um really the story of 2026 from our market data.
• 15:42
  SPEAKER_02: Again, there have been 17 of them uh this year alone, already through August 31st.
• 15:48
  SPEAKER_02: And I believe there are about 17 all of all of I think the last two or three years.
• 15:54
  SPEAKER_02: So this has really been the story of 2026, and I think the reason for that is this it's twofold.
• 16:00
  SPEAKER_02: One, the exchanges look at direct listings as a little bit less risky of a transaction than an IPO.
• 16:06
  SPEAKER_02: Remember what happens in an IPO.
• 16:08
  SPEAKER_02: There's a lot of things going on, there's a lot of people involved, there's a lot of horsepower behind that type of transaction, meaning the bankers are raising capital, there's new really um money coming in, there's legacy investors who want to get out of their position, maybe.
• 16:23
  SPEAKER_02: And then there's these, you know, stabilizing transactions that in the investment banks in um you know do to sort of stabilize the stock.
• 16:31
  SPEAKER_02: There's green shoe options and overallotments, and there's just a lot of volatility that the exchanges have seen on the LPO side.
• 16:39
  SPEAKER_02: That doesn't really translate when you talk about direct listings.
• 16:43
  SPEAKER_02: Direct listings are a little bit more subtle, a little bit sleepier.
• 16:46
  SPEAKER_02: Now, their post-listing performance this year has not been great, and we can talk about that.
• 16:51
  SPEAKER_02: In fact, I speak about that a lot all over the country, that we need to do better as an industry on post-listing performance for for direct listings.
• 16:59
  SPEAKER_02: Um, we need to do better as an industry for post-listing performance uh on direct listings because they've kind of just gone straight down.
• 17:09
  SPEAKER_02: So remember, the minimum price for a direct listing is$8 on the exchange.
• 17:13
  SPEAKER_02: Some go off at$10 or$12, but a lot of them have traded down to$2,$3,$4 right out of the gate, and some even lower.
• 17:20
  SPEAKER_02: And I think that's just a function of you know, management teams and others, you know, not being prepared for that going public moment where you have to get eyeballs on the stock.
• 17:31
  SPEAKER_02: You have to communicate with your shareholders, you have to do all the things that you and your team do very well.
• 17:36
  SPEAKER_02: And if you don't have someone like uh Watertower or somebody like uh a good group that can really manage that process, all you have left is your legacy shareholders that have been in the deal for a long time, probably have some deal fatigue, now have an ability to exit their position, and everybody runs to the door at the same time.
• 17:55
  SPEAKER_02: That's when bad things happen, and that's when the stocks go down.
• 17:58
  SPEAKER_02: So, you know, direct listings, I think, are a little bit uh more benign as viewed by the exchanges, but again, and and they're less volatile uh because there's less going on, but that does mean their post-listing performance has been better.
• 18:14
  SPEAKER_01: Well, and that brings up the next uh the next topic, which is staying listed, which is uh which is a whole nother set of issues.
• 18:21
  SPEAKER_01: Um, you know, lots of things going on there.
• 18:24
  SPEAKER_01: Rules have changed.
• 18:25
  SPEAKER_01: I know you touched on this a little bit already, but um, what are the key things that that both corporates and investors need to understand about staying listed once you get there to get through those the first the first part, the first hurdles?
• 18:38
  SPEAKER_02: Yeah, I mean that is a whole nother world.
• 18:40
  SPEAKER_02: You know, I'm writing a book right now on initial listings, right?
• 18:44
  SPEAKER_02: IPOs, up list, direct list, because I think it's such a underserved uh area where people really need to understand what they're getting themselves into.
• 18:54
  SPEAKER_02: But I could do three books on staying listed because that's how complicated it is.
• 18:58
  SPEAKER_02: I mean, the rules just keep changing.
• 19:01
  SPEAKER_02: And, you know, I understand the exchanges' position.
• 19:06
  SPEAKER_02: They want to have full, uh, transparent, you know, uh markets that people can rely on.
• 19:11
  SPEAKER_02: They're the best in the world, you know, uh, bar none.
• 19:15
  SPEAKER_02: And they've over the years have come up with many, many ways to, you know, sort of keep companies on their toes.
• 19:21
  SPEAKER_02: You know, they come up with reverse, excessive reverse stock split rules.
• 19:25
  SPEAKER_02: They come up with minimum bid price rules, they come up with low price security rules.
• 19:31
  SPEAKER_02: They've, you know, really have done um a job to um keep these companies on their toes and be very, very less forgiving.
• 19:39
  SPEAKER_02: So staying listed has become more difficult.
• 19:42
  SPEAKER_02: One of the things that we've been monitoring over the last couple quarters is really NASDAQ's$5 million market cap rule, which you know was proposed and then reproposed and then sort of went into effect by default and then stayed, and now is sort of reopened to the community for comment to see if the commissioners will actually physically approve this rule or just let it die in sort of sort of procedural committee.
• 20:10
  SPEAKER_02: But, you know, again, it's about having the right people around you.
• 20:14
  SPEAKER_02: It's about making sure that you have some sort of software or some sort of way to track all of your continued listening requirements.
• 20:23
  SPEAKER_02: It's almost impossible to do it by hand now.
• 20:25
  SPEAKER_02: There's some services out there that people could look into, and both for investors and for the companies.
• 20:30
  SPEAKER_02: But it really is a full contact sport, it's a full-time job.
• 20:33
  SPEAKER_02: And at least for us, what we do is you know, we monitor a lot of this through software and other analytics for our clients.
• 20:39
  SPEAKER_02: So we're trying to find problems ahead of time and really prepare them to solve problems before they get a delisting letter because the process has, you know, been very, very difficult for these uh emerging companies.
• 20:52
  SPEAKER_01: Yeah, and you know, from our perspective, we see you know looking at the shareholder base, for example, a lot of these small companies they come out, they may be 50, 60, 70% retail base in their shareholder mix, too.
• 21:05
  SPEAKER_01: So how you address and what you need to address in staying public, you know, is sometimes different than, oh, I just need a handful of a couple institutional investors and I'm gonna meet my minimum requirements is way more complex than that.
• 21:18
  SPEAKER_01: And I think, you know, going back to this idea of the of having a real plan and strategy and making sure you can stay public is is critical.
• 21:27
  SPEAKER_01: And I think you know, a lot of companies have a plan, oh, I got public, now everything's now everything's gonna be fine, right?
• 21:33
  SPEAKER_01: Like you said, a magic, a magic bullet.
• 21:36
  SPEAKER_01: And it just isn't the case.
• 21:37
  SPEAKER_01: Uh it's kind of like the work just began.
• 21:39
  SPEAKER_01: Absolutely.
• 21:40
  SPEAKER_02: I say all the time, I say, look, when you get public, that is the beginning.
• 21:43
  SPEAKER_02: It is great to celebrate, and we get high five and we can go out to lunch when you ring the bell.
• 21:48
  SPEAKER_02: But the real work starts the next day.
• 21:50
  SPEAKER_02: It's just like you know, I was just down in uh Oxford, Mississippi this weekend visiting my daughter, who's a sophomore, and I was at the LSU All Miss Game, and it was awesome.
• 21:58
  SPEAKER_02: What a great weekend.
• 22:00
  SPEAKER_02: But it kind of reminded me of, you know, championship, you know, championship level athletic play and championship coaching.
• 22:06
  SPEAKER_02: You know, uh when Ole Miss won, you know, Lane Kiffin came uh Lane Kiffin came out and gave a whole sub story and explanation.
• 22:14
  SPEAKER_02: Uh Pete Golding, the coach of Ole Miss, said, Hey, this is a great win.
• 22:17
  SPEAKER_02: It's never been about LSU.
• 22:19
  SPEAKER_02: I get it was emotional, but we're here to win a national championship.
• 22:22
  SPEAKER_02: And tomorrow we'll move it on to Florida.
• 22:24
  SPEAKER_02: The work begins tomorrow morning.
• 22:26
  SPEAKER_02: That's the same thing for a public company.
• 22:28
  SPEAKER_02: Just because you get listed, just because you ring the bell, doesn't mean that uh, you know, you've you've arrived.
• 22:34
  SPEAKER_02: You've you've achieved your goal.
• 22:36
  SPEAKER_02: That is really the beginning.
• 22:38
  SPEAKER_02: You need to, you know, celebrate and then uh recalibrate and the next day uh begin your march towards building shareholder value and growing that company.
• 22:47
  SPEAKER_02: Getting listed is far from the magic bullet, it's a great stepping stone, it's a great milestone.
• 22:52
  SPEAKER_02: We've you know, we've helped dozens and dozens and dozens of companies get public and ring the bell, but that is really when the real work begins.
• 22:59
  SPEAKER_01: And I think it it starts, you know, even before they get into trouble, right?
• 23:04
  SPEAKER_01: I mean, uh, there's there's things that start to happen that they need to watch for.
• 23:08
  SPEAKER_01: So if you're a if you're a corporate and you've you've gotten in the public markets, what are the key things that you really have to you know keep your eye on and make sure that you're proactive on?
• 23:19
  SPEAKER_01: Because you know, the market's smart, it starts to sniff, sniff things out.
• 23:23
  SPEAKER_01: So what do you see as that what do you want to call call it a waterfall or cascade of things that start to happen to companies that they need to address right away?
• 23:31
  SPEAKER_02: Yeah.
• 23:32
  SPEAKER_02: So from our perspective, from the legal perspective, we are um always looking at a whole range of data and analytics and issues.
• 23:40
  SPEAKER_02: But the two things that really will get you in trouble with the exchanges, at least, because that's really you know where it starts.
• 23:47
  SPEAKER_02: If you're in trouble with the exchanges and you have to put out an 8K or a press release saying, hey, we got a delisting letter based on this sort of listing criteria, that's when bad things start and the sort of things start to circle the drain.
• 24:01
  SPEAKER_02: So the things that we look at right away is one is shareholders' equity on the balance sheet that has to stay above$2.5 million minimum, preferably stay above$5 million, because once you get below that, that's when the exchanges start to really take a quick and hard look at you.
• 24:18
  SPEAKER_02: And you know, you don't want to be getting a delisting letter uh based on shareholders' equity deficiency so early on.
• 24:24
  SPEAKER_02: The other thing, and this is an easy one, especially in the direct listing world, is your share price, your bid price.
• 24:31
  SPEAKER_02: Remember, NASDAQ has a rule that if you trade below a dollar, even at 99 cents, for 30 days, you're gonna get a delisting letter.
• 24:40
  SPEAKER_02: And the only way to uh to stop a delisting is to get an extension or maybe even go and win a panel hearing.
• 24:48
  SPEAKER_02: But the only way to do that is if your shareholders' equity is very healthy.
• 24:52
  SPEAKER_02: So, you know, it's really a downward spiral once you start to get uh shareholders' equity that's depressed, bid price that's depressed, and there's a whole number of other items that you know we could talk about.
• 25:02
  SPEAKER_02: But those are the two things from a compliance standpoint that we take a look at uh right from the beginning and continue to monitor on a uh real-time basis.
• 25:13
  SPEAKER_01: And you have some great data that you guys have put together, you know, looking at reverse splits and things like that, the success of getting that uh that minimum bid, right?
• 25:22
  SPEAKER_02: Yeah, listen, uh we do.
• 25:24
  SPEAKER_02: We track not just the the initial listing data now.
• 25:28
  SPEAKER_02: We have been tracking reverse split data and how many companies can cure their bid price deficiency without a reverse split versus a reverse split.
• 25:37
  SPEAKER_02: The data is really fascinating.
• 25:39
  SPEAKER_02: And you know, I thought as well before you started tracking this data that, you know, most companies needed a reverse split to cure their bid price deficiency.
• 25:47
  SPEAKER_02: And it turns out that somewhere around like 35 or 40 percent actually cured on their own.
• 25:52
  SPEAKER_02: Like who would have known, right?
• 25:54
  SPEAKER_02: I mean, this is just that's why data is so fascinating.
• 25:57
  SPEAKER_02: We use this data to really, really make better decisions in the marketplace and hope that the industry and the community itself can use that data to make better decisions, you know, for whatever they're doing.
• 26:10
  SPEAKER_01: So, one thing on the data, just uh a general view, I guess.
• 26:14
  SPEAKER_01: You know, small caps have done well this year on a relative basis for the first time in a long time.
• 26:20
  SPEAKER_01: But when you look at the mix of the market cap stack and what's small cap, it's you know, it's kind of like the Mag 7 was, you know, last year for a while, where you know a very small portion of the largest companies are driving most of the uh you know of the index, right?
• 26:37
  SPEAKER_01: And the performance there.
• 26:39
  SPEAKER_01: So small caps overall have done well as an index, but you know, it's still been very challenging for a lot of the smaller, uh, you know, the smaller companies.
• 26:48
  SPEAKER_01: And from your side, when you in looking at what's going on after they're public, um, do you have any thoughts on um you know what it is that uh that's making this difficult for them in the public markets with investors?
• 27:01
  SPEAKER_02: Yeah, I think that again, it comes back to the um the size and the quality of the company.
• 27:07
  SPEAKER_02: Now, again, in 2026, the market has been completely inverted.
• 27:12
  SPEAKER_02: 2025, the storyline was foreign private issuers, companies from Asia, including Greater Asia, not just China, Singapore, Malaysia, Indonesia, all those places.
• 27:23
  SPEAKER_02: This year, it's domestic companies.
• 27:25
  SPEAKER_02: Domestic companies are generally bigger, the capital raises are larger.
• 27:30
  SPEAKER_02: Um, there's really no more deals sort of squeaking by.
• 27:33
  SPEAKER_02: Uh, there's no easy deal, of course.
• 27:35
  SPEAKER_02: But the question really remains: are these companies still big enough and strong enough to um thrive, not just exist in the capital markets?
• 27:45
  SPEAKER_02: And that's really the question.
• 27:47
  SPEAKER_02: Can they thrive?
• 27:48
  SPEAKER_02: Because once they run into a problem or two and they take the wrong kind of money or they get in bed with the wrong kind of institutional investors, that's when things go south very, very quickly.
• 27:58
  SPEAKER_02: I will also say that, you know, at least from our perspective, and I think a lot of market participants are looking and trying to help companies uh be more careful about their capital raising plans, even before they get public.
• 28:12
  SPEAKER_02: Some companies don't belong public.
• 28:14
  SPEAKER_02: They should stay private.
• 28:15
  SPEAKER_02: Some companies should go to the OTC and sort of try it out there, start reporting, see what they can do.
• 28:20
  SPEAKER_02: Even I know I recognize liquidity is difficult and it's hard to raise money on the OTC.
• 28:26
  SPEAKER_02: That's a better option than going directly to the Nasdaq and the New York Stock Exchange and really falling flat on your face and accentuating your problems in a very public way.
• 28:35
  SPEAKER_02: So, you know, um, we're seeing bigger companies.
• 28:39
  SPEAKER_02: Hopefully, though, uh, they will be able to, again, thrive and build shareholder value and not just exist uh to raise more capital and try to carry out their business plan.
• 28:50
  SPEAKER_01: Yeah, the survival, the keep the lights on capital versus the growth capital, right?
• 28:54
  SPEAKER_01: That's becomes a you know a challenge for the companies.
• 28:56
  SPEAKER_02: Yeah, yeah, but I also see Sean, you know, I sit across from founders every day, entrepreneurs.
• 29:00
  SPEAKER_02: I talked to three of them today about going public, and you know, two of them really weren't ready.
• 29:05
  SPEAKER_02: They were very small, and they they they heard from their friend that, hey, you know, I can go public and I can raise a lot of money and I can uh you know fulfill all my uh my capital raising dreams.
• 29:15
  SPEAKER_02: That's not the case.
• 29:16
  SPEAKER_02: You know, one of them I think was a little bit closer to being ready.
• 29:19
  SPEAKER_02: So at least from our perspective, we try to evaluate these companies and see, again, we're not judging them, but when you sit down in front of an entrepreneur and say, look, maybe you're not ready, or you know, maybe uh you need to wait, they don't want to hear that.
• 29:33
  SPEAKER_02: I mean, entrepreneurs are strong-minded, strong-willed people, and they want to do what they want to do.
• 29:37
  SPEAKER_02: And they're not gonna just give up and take no for an answer.
• 29:39
  SPEAKER_02: That's why they're entrepreneurs.
• 29:41
  SPEAKER_02: So it's not my job to judge them or their company or their business plan.
• 29:45
  SPEAKER_02: It's my job to give them advice and sort of help them create a plan and a path to getting to the exchanges.
• 29:52
  SPEAKER_02: So if they qualify on the merits or they're what we call within striking distance, meaning they're very close, maybe a capital is will put them over.
• 30:00
  SPEAKER_02: It's really not for me to say, hey, you're too small, you're not ready, you're not capitalized enough.
• 30:06
  SPEAKER_02: It's it's really they're never gonna listen to me.
• 30:09
  SPEAKER_02: No entrepreneur worth their salt would.
• 30:11
  SPEAKER_02: So it's our job to give them the best advice.
• 30:13
  SPEAKER_02: What we're not doing, though, is we're not trying to convince companies to go public.
• 30:17
  SPEAKER_02: You know, that's sort of uh a thing of the past.
• 30:20
  SPEAKER_02: I think the practitioners that do that, I don't know many of them that do that, you know, really do a disservice.
• 30:25
  SPEAKER_02: So we're always trying to lead from the front and give data and show a path and help them execute in a way that, you know, puts us in a position to be the quarterback and lead the entire process.
• 30:35
  SPEAKER_02: And some companies, they're just not ready.
• 30:38
  SPEAKER_01: You brought up an interesting point, OTC versus Nasdaq.
• 30:41
  SPEAKER_01: And you know, we see that a lot where I think sometimes companies think a listing on the Nasdaq is going to solve their problems versus the OTC, and yet there's still a$35 million market cap company on the O on the NASDAQ that doesn't have a lot of trading.
• 30:57
  SPEAKER_01: And you know, so this idea that just being there is going to solve their problems, sometimes it seems to create more problems, actually, you know, if they're truly not ready for this.
• 31:06
  SPEAKER_01: So what you know, what would be your advice if you were, you know, get some, you know, sitting in a room with a board and they're talking about options and you know they're they're still emerging, they're not quite there.
• 31:18
  SPEAKER_01: Is it an option to do something on the OTC and then wait for the up listing?
• 31:22
  SPEAKER_01: I think you touched on that a little bit, but just getting to the Nasdaq doesn't solve your problems.
• 31:28
  SPEAKER_02: Yeah, I think the OTC is a great platform and it's very deserving of many companies.
• 31:33
  SPEAKER_02: And I do think companies should start there.
• 31:35
  SPEAKER_02: I know that's not a very popular opinion.
• 31:38
  SPEAKER_02: So hopefully I'm not gonna get too much hate mail for saying that.
• 31:41
  SPEAKER_02: But it but it is true.
• 31:43
  SPEAKER_02: I mean, we just took a AI company uh who wasn't quite ready for NASDAQ to the OTC.
• 31:49
  SPEAKER_02: We got them a symbol, um, you know, we did the whole process, and over that sort of one year period, they have grown substantially.
• 31:56
  SPEAKER_02: Where they're literally gonna be trading on the OTC for three to six months, if that.
• 32:02
  SPEAKER_02: And we're already applying to the senior exchanges because they've executed their business plan.
• 32:07
  SPEAKER_02: And if they didn't execute, they probably would spend some more time in the OTC, and that's okay.
• 32:12
  SPEAKER_02: You know, the senior exchanges aren't right for every company.
• 32:15
  SPEAKER_02: Now, what you're gonna get on the OTC is a mixed bag.
• 32:18
  SPEAKER_02: Some companies have good liquidity, some companies can raise money.
• 32:23
  SPEAKER_02: A lot of companies don't have great liquidity, can't find the right capital, and really can't find any interest from investors who want to uh either buy or, god forbid, hold their stock on the OTC because of how that platform works.
• 32:37
  SPEAKER_02: But I'm a big proponent of the OTC under the right circumstances, and not every company has to go direct to New York Stock Exchange.
• 32:44
  SPEAKER_02: What we do, which is very different, Sean, we'll do a free uh what we call listings analysis, where we'll get some data from the company, you know, based on their fundamentals, based on the listing requirements.
• 32:57
  SPEAKER_02: You know, we call it, you know, the core four sort of listing requirements and to see, run an analysis to see if that company is within what we call striking distance, meaning they're at or about where they need to be to sort of list on a senior exchange.
• 33:12
  SPEAKER_02: If they're not, we'll help them and recommend, you know, alternative an alternative measure.
• 33:17
  SPEAKER_02: And sometimes that's the OTC.
• 33:19
  SPEAKER_02: It's not often, but sometimes the OTC could be the right platform.
• 33:23
  SPEAKER_02: Now, explaining that to a founder or a CEO and convincing them that that is the right place to be is a whole nother story.
• 33:31
  SPEAKER_02: And that is, by the way, a full contact sport.
• 33:34
  SPEAKER_01: Yes, it is.
• 33:35
  SPEAKER_01: Yes, it is.
• 33:36
  SPEAKER_01: And I think, like you said, everybody's you know, you're to be a CEO and a founder, you have to be an optimist, right?
• 33:41
  SPEAKER_01: You have to be thinking get anything done.
• 33:44
  SPEAKER_01: But uh sometimes that's where good advice comes in from somebody like Joe here, right?
• 33:49
  SPEAKER_02: Absolutely.
• 33:50
  SPEAKER_02: And I I listen, I'm an entrepreneur myself.
• 33:52
  SPEAKER_02: I built our firm from literally three people to over a hundred people, and you know, this is our 15th year, our 15th anniversary was just last week.
• 34:00
  SPEAKER_02: And, you know, I'm strong-willed, you're strong-willed.
• 34:03
  SPEAKER_02: That's what the entrepreneur mindset is.
• 34:05
  SPEAKER_02: So, you know, but you have to also take the advice of those who've been there before you or have done it, you know, before you.
• 34:10
  SPEAKER_02: And that is really having an open mind to those types of um uh new information is is super important.
• 34:17
  SPEAKER_02: But again, not an easy uh endeavor by any stretch.
• 34:20
  SPEAKER_01: Great.
• 34:21
  SPEAKER_01: Well, this has been awesome, Joe.
• 34:22
  SPEAKER_01: Thanks so much for joining us.
• 34:23
  SPEAKER_01: I'm sure there's tons of information, and of course, they can reach out to you and the team there uh, you know, for additional follow-ups.
• 34:30
  SPEAKER_01: But thanks so much for joining us today.
• 34:32
  SPEAKER_02: Yeah, thank you.
• 34:32
  SPEAKER_02: I uh appreciate being here.
• 34:34
  SPEAKER_02: I always love uh talking to your listeners, and um, again, you can find me on LinkedIn or YouTube.
• 34:40
  SPEAKER_02: We put out lots of data in the industry, both on new listings and you know, um continued listing uh topics.
• 34:48
  SPEAKER_02: And um, you know, we speak around the country, and I'll certainly be keeping you and all of your listeners um posted on our endeavors and any new rules and information that comes down that's critical to the emerging growth marketplace.
• 35:01
  SPEAKER_01: Right.
• 35:02
  SPEAKER_01: Thanks, Joe.
• 35:02
  SPEAKER_01: And if you and if you're an investor or a company, you need to see this data, you need to take a look at it, you know, as part of your your own understanding of what's going on in the markets.
• 35:10
  SPEAKER_01: If you're an investor, small cap, microcap investor, it comes with things you need to understand.
• 35:16
  SPEAKER_01: I'd highly encourage you to take a look at uh at the data that Joe and team puts together.
• 35:20
  SPEAKER_00: Thank you for listening, and don't forget to subscribe, as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 35:36
  SPEAKER_00: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 35:41
  SPEAKER_00: Finally, a special thanks to the producer and editor of the podcast, Christoph Fitzpatrick.