Wiedower Capital, a Texas-based investment firm that focuses on small caps, is bullish on Issuer Direct Corp (NYSEAMERICAN:ISDR). In its annual letter to investors, the firm’s manager Travis Wiedower discussed its investment thesis on Issuer Direct, which provides disclosure management solutions and cloud-based compliance technologies. Wiedower likes the company because it is “founder-led, profitable, growing, lots of cash, zero debt, a durable competitive position, and a long runway for growth.” In this article, we’ll briefly discuss Issuer Direct and take a look at Wiedower’s comments about the company.
Let’s start with the introduction, Issuer Direct is a $52-million market cap communications and compliance company that focuses on the needs of corporate issuers. Its product portfolio includes Investor Network, Accesswire, Blueprint, iProxy Direct, iR Direct, Annual Report Service and Company Spotlight.
Wiedower said in the letter that Accesswire, a news distribution service, is driving most of the company’s current value and will soon become a notable name in the news distribution industry, which is being dominated by PR Newswire, Business Wire, GlobeNewswire, and Marketwired.
If you ever look at press releases from small and micro-cap public companies, you’ve almost certainly seen releases that were put out by Accesswire. As a news distributor, Accesswire is basically a middleman between a company that wants to put out a press release and the platforms that investors see that press release on. So a company gives its press release to Accesswire and they distribute it to Bloomberg, the Wall Street Journal, TD Ameritrade, Scottrade, and many other news outlets, according to the letter.
Accesswire focuses on “the low end of the market (micro-caps as opposed to larger caps)” in the news distribution industry. Wiedower believes that Accesswire will be able to move up-market to larger companies easier than the big news distributors will move down-market because of the pricing difference.
Right now, Accesswire has less distribution than the big guys (Brian Balbirnie, the CEO, estimates they have around 85% of all distribution). For tiny companies that can save 50% on each news release, whether they get 85% of distribution or 100% doesn’t really matter. But as Accesswire continues to grow, getting those incremental distribution points will matter more. Eventually, I believe Accesswire will be able to get 100% distribution (or close to it) thanks to Regulation Fair Disclosure (commonly referred to as Reg FD), Wiedower told the investors in the letter.
Meanwhile, Wiedower said that he likes to invest in founder-led companies like Direct Corp (NYSEAMERICAN: ISDR) because “founder-led companies have intangibles that are almost impossible to replicate.”
Unfortunately, most hired CEOs own little stock (meaning they have little voting power) and could be fired at any moment, which encourages them to focus on making as much short-term money as possible (usually through annual bonuses). Founders almost always have a significant voting share so there’s a much higher chance that they’re around for the next 20 years (and just the fact that they’re the founder gives them more staying power). A founder also has far more economic incentive to grow the business over the next several decades (thanks to their large ownership share) as opposed to focusing on short-term incentives. All of this adds up to founders, in general, being far more aligned with minority shareholders like us because they’re more likely to care about the long-term health of the business, according to the letter.
On Friday, shares of Issuer Direct Corp (NYSEAMERICAN: ISDR) closed up 2.31% at $17.70. Over the period of the last 12 months, the value of the company’s stock has increased to whopping 97%. The stock has a P/E ratio of 32.26. On a quarterly basis, the company pays a dividend of $0.05 per share. Based on its current share price, this represents a dividend yield of 1.13%.