Ep756: Peter Goldstein – Check Your Emotions at the Door

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community. We know that to win in investing, you must take risk, but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. And I want to thank all the listeners from Singapore who are listening in for joining this mission today. Fellow risk takers this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guests. Peter Goldstein. Peter, are you ready to join the mission?

Peter Goldstein 00:42
Onboard for the mission? Yes,

Andrew Stotz 00:45
I am excited to talk to you and been looking forward to this discussion. So let me introduce you to the audience. Peter is a seasoned entrepreneur, capital markets expert, an investor with over 35 years of diverse international business experience. Throughout his career, he's held pivotal roles including CEO, Chairman, investment banker, founder, board member, investor, and advisor to public, private and emerging growth companies. He founded exchange listing LLC dedicated to facilitating growth companies listing on a steams exchanges like NASDAQ and the New York Stock Exchange. He also founded ms capital A specialized boutique fund investing in global small and micro cap IPO or pre IPO companies growth companies. Why don't you take a minute Peter and tell us about the unique value that you are bringing to this wonderful world?

Peter Goldstein 01:42
Thanks for the intro, Andrew. You know, the first place is really aligning with entrepreneurs. You know, a lot of entrepreneurs like me when I was younger, have the dream, and the vision to list their companies on a global stock exchange, such as NASDAQ, or the New York Stock Exchange. And that's a very complex route, you know, you need to prepare 18 to 24 months prior, and really build a foundation of taking your company through the process of transitioning from private to public. I've done it twice with my own companies, I never had a trusted advisor. I never had a guide, or quarterback, a Sherpa, whatever you may call it to help me work through all those complexities. And therefore I made, you know, countless mistakes and learn countless lessons along the way. So after a very unique career last 25 years in the capital markets about four years ago, I formed exchange listing really to position ourselves alongside of the entrepreneur, but to help them navigate these complexities. So we work with investment bankers, we work with securities attorneys, we work directly with the exchanges and NASDAQ, New York Stock Exchange, and take the companies through a process and preparing them, educating them and then executing properly on their IPO with a focus on small to medium sized companies. And there's an entire marketplace there enter that people don't realize is possible. You don't have to be a unicorn. So the big myth to debunk, to debunk and and to really break apart is that there is an entire market and access to transformational capital that is available to earlier stage micro and small cap companies.

Andrew Stotz 03:32
And just out of curiosity, when a company says I want to list in the stock market, and they've got a pathway to listing and they've met most of the requirements, let's say that I suspect they're generally going to hire an investment banking firm that's going to help create their prospectus and help them go through that or, or is that what you're doing? Or are you saying, I'm guiding you through the overall process, and I'm gonna help you to make sure that you got the alignment from the different participants that are naturally going to help you to get through all of the paperwork and stuff that you've got to get through to get there.

Peter Goldstein 04:10
Correct. It's really the latter. And even before being able to engage an investment banker, you have to do a tremendous amount of work to attract the proper banker. And and that's different by the size of your company, the amount of capital you need to raise the tier in which that banker sits and getting access to them, they they're very difficult to be able to get the attention of so we first properly prepare the company and go through financial modeling the deck with the audience, being the bankers, and then we'll interview and qualify a number of bankers and then in a perfect situation. There's what they would call a bake off where you've got bankers competing for the rights to be able to take the company public and of course, that investment banker which I used to be one of sits between the company then and the investors and their job We used to bring that capital in to help support the initial public offering. And

Andrew Stotz 05:05
what would you say is the hardest part about listing assuming, let's just assume that I think one of the most important parts of this thing is that you have a strong story and a good growth, opportunity for your business. I think, you know, there's other aspects to it, for instance, trying to bring, you know, as much liquidity to the market as you can, those types of things. But when it just comes to kind of the mundane stuff of, you know, steps it takes to get into the market, what would you say is kind of the, the most important stuff

Peter Goldstein 05:38
starts a lot with, with the foundation of your record, keeping your bookkeeping, you're going through a financial audit, most private companies have never gone through the requirements of taking how they've organized their companies now, by inviting outsiders in to examine every single aspect of your business, and then take you through a compliance audit for two years prior to the listing, right, so So that's an event by itself is an incredibly challenging task. And even there, there are unique characteristics that the company can prepare and organize to facilitate a much smoother and easier path to getting the audit done. But that's just one, we take companies through 10 different steps of organizing them. And so audit is really the longest and most difficult, probably challenging item. From there on, it gets easier. But that's the longest Timeline Item as well, interim. So when we're looking at a company listing, we say, hey, let's work 24 months or 18 months backwards to where we are today. And then set out a roadmap like any other journey you would take, you need a roadmap, and then you need to be able to understand what are the challenges, and then the stops along the way with those milestones to successfully reach your end goal and result.

Andrew Stotz 06:57
I have a student of mine at university, and he's got a fast growing company. And he's so focused on listing, it's very fascinating. He's learned everything you can, and he, you know, he decided he was going to get the best software. So he's got SAP, which is very expensive. But you know, he decided he's going to make sure he's got his accounting, right. He hired the accountants, the big four accounting firms and audit firms to make sure that he's already getting the accounting and the auditing in place. He's been working on his board of directors and thinking about the governance aspect of what he's trying to do. And I'm really impressed by him, you know, and I'm just curious, like, what, when somebody really is like preparing ahead of time? Are there any snack foods or other things that you think couldn't happen? You know, as you get deeper into the process, even though you've kind of done everything, right.

Peter Goldstein 07:56
We don't have enough time to talk about all the snack foods Yeah, got that come about, you know, one of the things and this is one of things I love about working without what I do in advising and taking these companies through this journey, there are so many variables that can come up along the way. There's business dynamics, there's accounting or market dynamics, you know, they were regulatory components, there's governance components. And any one of these, if you make a misstep, are often interrelated, and could cause significant upset to the entire process. One of the most classic mistakes I see is that companies don't understand building their cap structure, their capitalization, the number of shares are offering at what price and what structure can ship them up, as they go through the process. And then you have to undo or redo or have different structures inside of the investment, and often the valuation that comes that investors have come in prior. So there are a number of a myriad of different scenarios that could go wrong. And part of this is all then examining and doing an assessment of where you are and making sure that you execute critically as you would go forward through those steps.

Andrew Stotz 09:07
The other thing that's interesting is when you look at the data of new listings or net new listings, let's say new listings minus d listings, and you look at the growth in markets, it's all in Asia, basically over the last 10 or 10 or 15 years, where you know, think about China, China went from almost nothing to having 3500 listed companies. And I'm telling you the interesting thing about those companies is that 3300 of them are large and liquid. So if you do as I've done in some of my research, where I've, I've looked at markets and I've stratified markets across the world, based upon a certain level of liquidity to ask, you know, how large and liquid are the stocks in the market China, India is just the opposite. A huge number of stocks, but a very are a small number that are large and liquid. But China's just the opposite is probably the largest and liquid most liquid market in the world. But then you look at the US and like, what's happening to capitalism? How can it be that we've had D, so many more D listings than IPOs? And, you know, I know that there's arguments about after the 2000, you know, bubble, we then had Sarbanes Oxley come in. We've had Dodd Frank come in maybe as more regulation and other regulations that are added in and now, what I can see happening in Asia, and I'm sure it's happening in the US is that the bureaucrats and the technocrats are marching in on listed companies with all kinds of regulations that they want to implement related to ESG sustainability, carbon this this that and is not like, is it getting less attractive for a mid size or small size business? To even have the ambition of listing on the market? Is it really only the space for the biggest companies that can afford all of that compliance?

Peter Goldstein 11:03
Yeah, it's a trade off Andrew, and whether you're going for venture capital, you're going for private equity, there are costs to each one of these, because I'm an advocate of going public, obviously, and going public early and growing your business through access to liquidity into capital that come from the public markets. So there's a cost to everything. There's a trade off, I would agree with you that, you know, essentially, right now, you know, in this current year, is one of the worst IPO markets we've seen. There is a pent up demand, though, of capital seeking to enter the markets. So I think as we get through all of these current geopolitical and other factors that are really impacting the markets around the world, especially the United States, that things will loosen up in the way of access to capital and regulatory components that are currently restricting a fair number of companies. And where I'm looking, is, we work with international companies as well, I just listed who companies out of the Asia Pacific this year. And so there is a still a prestige to listing on the NASDAQ or the New York Stock Exchange. And there are there's a cost that comes along with it. So we have the ability to list companies from all over the world coming to access both capital and liquidity through the institutional investors that are trading the stocks on those two Premier Senior exchanges. And

Andrew Stotz 12:27
for companies that are international, let's think about Asia, where I am Thailand as an example. Are they always going to have a local listing? And then do a another listing in the US market? Or are they going to go and say I just want to list in the US? Um, what are the downfalls? You know, with the different ways of doing it?

Peter Goldstein 12:49
It's interesting, so they do not have to list on a local exchange, they can come directly to United States as a foreign filer. And those are actually less restrictions and regulatory requirements than you would if you were a US based and US domiciled entity. So it's advantageous for foreign filers to come. And they do not have to do a primary listing in their home jurisdiction, they're able to come directly. And that I think, is one of the unique opportunities that we have in working with foreign companies where especially if they want to build their brand, and build their presence in United States, I think going public is one of the greatest marketing tools. And companies don't necessarily look at this, they of course, look at the access to capital, they look at the liquidity and having stock as a currency. But if you think about a foreign company who either has or wants to build their US presence, what better way to be able to market and advertise that you've gone through all the regulatory scrutiny, you know, all of the compliance, everything that was required, including the diligence from investors, to now be able to attract, you know, shareholders, strategic partners, and even potentially m&a opportunities.

Andrew Stotz 14:03
And one of the things there was a beverage company in Thailand, an alcohol company that there was a big protest by the owners, you know, opponents and basically they managed to prevent them from listing in Thailand many years ago. So the beverage company went and listed in Singapore. And so now you have this Thai entity this listed in Singapore market. And I would argue that it got lost in a no man's land. The local analysts didn't really cover it because they weren't really covering the Singapore market. And the Singapore analysts saw it as something kind of different, you know, and so they didn't, it was really hard to get the awareness. I'm just wondering for let's say, a mid size, you know, company that's coming in, I guess when you bring a mid sized company into the US market us probably ends up being a small cap company, but for that type of situation, do they fall into kind of a no man's land and it makes more sense to have a local listing or is that not Such a big problem? No,

Peter Goldstein 15:01
it is, it is a challenge. And I would say, you know, one of the things that I focus on with our companies and our relationships is that you can get your company through the process, like we were talking, but nobody knows about you. So then you have to invest in creating awareness. And what's changed in the last, you know, call it five to 10 years is that now retail investors can actually access these opportunities directly. So we separate the buyers, you have retail, individual investors, who can utilize technology and invest from around the world, as well as institutional investors. So we work with those companies to create an awareness campaign, just like you are marketing your product, anywhere else, you now have a second opportunity to market your stock, but you're not marking it as a product or service to sell your marketing as a product for or an entity for investors to participate in. And that takes time, and it costs its cost, obviously, you know, significant investment, before the institutions have a chance to really understand what your stock is, what your company is, and that there's enough volume and liquidity for some of that machine trading and some of the other benefits that you get from the algorithms that kick in and the institutional support that comes. And then of course, there's getting research, and there's getting analyst coverage. These are longer term pathways, you know, the stock doesn't trade itself. And and and it requires a significant investment. And I think that would be true. And you're whether you're doing local market, or you're doing something overseas, you really have to look at this, like you're in a second business. And it's you have your operating company, and then you have the company of being public. And we treat it that way. And that

Andrew Stotz 16:53
you mentioned about analyst coverage, how important is analyst coverage these days, compared to I don't know, 510 15 years ago?

Peter Goldstein 17:02
I think it's equally if not maybe more important now to get the credibility of having an analyst who understands your specific business inside of a sector with expertise and knowledge of where do you stand along with comparable companies, and those benchmarks and those KPIs that are used to be able to measure you, you know, against competitive companies. And it's critical, because otherwise, again, how do you have a basis of comparison to, you know, the value today versus the future opportunities and the growth? And what are we all after we're after a return on our investment. Right, so it's an outside third party, looking to give, you know, their, their input based upon my area of expertise and study. I'm

Andrew Stotz 17:45
just curious, in Thailand, the regulators, as well as the stock exchange, and others complain that we're losing analysts, we just don't have as many analysts as we had in the past. Some people think that the job of an analyst is really kind of dead. People say, well, people don't read long reports anymore. You know, even institutional clients don't read it. The attention spans gotten, you know, shorter. And I'm just curious, like, just what is your perspective on what's changed in the world of financial analysts in the US?

Peter Goldstein 18:16
I think it's similar. There's a shrinking base. And then of course, there's a regulatory there's a wall built to Chinese wall, so to speak, between the banking side and the research side. And, and just like you're saying, the reports have gotten shorter, they're much more streamlined, you know, they're more more focused on being able to put that out to their existing, you know, relationships, as opposed to putting it out, you know, over the wire. Because like you said, people don't have the bandwidth. They don't read. They're not particularly interested in thick, you know, extensive reports. So the summary and the cohesiveness of a good analyst who has a following is definitely a critical component.

Andrew Stotz 18:58
Well, I got so many different questions, but I want to get on to your, you know, your story. And before we do, though, where's the best place for people to follow you to learn more about what you're doing? You know, so that, if they're thinking about listing themselves or anything like that, they can learn more.

Peter Goldstein 19:15
The best place is LinkedIn. Andrew, I'm very active in LinkedIn, I put a lot of information out about the industry about the things that we're discussing, that the IPO markets, about investors, as well as different perspectives that I have, you know about the world and leadership and business. So, you know, please, you know, find me on LinkedIn. And for those that are interested in the book, just send me a DM, and we'll figure out how to get it to date.

Andrew Stotz 19:39
And I'll have a link to that in the show notes so that anybody can go there and learn more. Well, now it's time to share your worst investment ever and since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to and then tell us your story.

Peter Goldstein 19:59
You know, this was a child Lynch, Andrew, because I've had many, so I had to think about what would be the top of the worst. And then why. And and when I was thinking through it, I was thinking about all the different things that led up to the interplay of different components that had me making this investment decision. And I was living in California at the time. And at that, at that point, I was when cannabis was getting legalized for recreational purposes. So the so called green rush. And when I was looking at the interplay, I was thinking about, Okay, well, what were the factors that had me want to invest in a licensed facility that was going to manufacture and distribute recreational and medical cannabis products in the largest state, in the United States of America with the most history in the cannabis sector of any other state in the union. And so those components were, there was a crowd, you know, there was a trend, it was jumping on the trend, there was an emotional component of greed, like, you know, wow, I could really make a significant, you know, exponential return on my investment. And I did not think about the risk component, nor that I think about getting expert advice that would guide me through understanding where this would be. So when the day was done, I and four of others put a significant amount of money into opening up this facility in in Long Beach, California, positioned in Los Angeles County, you know, the largest county where cannabis was in great demand, prior to a limited number of licenses being put together by you know, the state in order to legally and we went through all of them Saturdays to get the license to comply, to build the facility, not realizing that all along the way, the complexities and challenges that would come ending up resulting in the worst investment I've ever made.

Andrew Stotz 22:03
And can you remember the day when you said, All right, this is over?

Peter Goldstein 22:11
Unfortunately, as I would think you might get another stories, it was a slow grind. And I think the final, Yes, correct. And I think the final day was when all of us sat together and said, We're just not going to put any more money into this. But that was like that, by 1000, cuts it just on and on and on and on. And every time we thought we had turned the corner, there was another capital call. And we would turn that corner. And then there was another cash call and another cash call and another cash call. And that went on for a period of about two years.

Andrew Stotz 22:52
It's such an applicable thing here, because in Thailand, we have a green rush, for sure. And Thailand is really liberalized. And there is a shop on every corner is everybody's growing and all of that. So I think I want to just address that group of people, including friends of mine and clients of mine. Like what would you say was? Was it regulatory? Was it market? Was it marketing? Was it operational? What was the kind of the core thing that was most difficult for you guys?

Peter Goldstein 23:24
The biggest expense was compliance with the regulatory, which was move. We were early, we were one of the first movers. And so as we were learning, so were the regulator's and every time they learned something new or something changed. Well, we had to react to that. But that really was, I would say, part one. Part two, is that there was not yet a proven market. There was a gray market, and there was certainly a black market. But there wasn't a compliant market where it was understood what the true margins would be, what the true cost would be. Of course, we knew that there was great demand. But when you tacked on all of the costs of producing regulatory taxes, and then distribution, margins were slim to none.

Andrew Stotz 24:27
And that's because there's because it's a green rush. You also have someone on every corner coming up and they're willing to cut the price down or was it just because the costs were just rising faster than you could keep up with?

Peter Goldstein 24:42
It combination? It was interesting, Andrew, so when we got our license, there were a limited number of licenses. And we thought that the regulators were going to hold true to that. Well, then they opened up more licenses and more licenses and more licenses. So the van Do you have what was looked at as very significant became a commodity, as did the product? And in California, I don't know about, you know, in other markets around the world, but I got my so called dummy tax, you know, from the California component of working in the industry was the black market thrives because you could buy the same product cheaper, without the black markets. Correct. And the taxation, right. So, you know, it really was was a learning experience that occurred, even when we got through all of the regulatory components, that what ended up happening really was that the market and the margins were so thin, and the demand was, was always been there, but people are gonna look at if I can buy the same quality product at a lower price, they're not concerned about compliance.

Andrew Stotz 25:59
It reminds me of a conversation I had with my first boss many years ago, I started working for him in 1993, in the stock market, he's very brilliant guy, John Trumpton. And if you recall, the movie, the graduate, where his Dustin Hoffman, I believe, is told, you know, the future is plastics. Right? And it, that movie came out right when my father was working for DuPont, in plastics, and he built his whole career in plastic. So that was kind of a meaningful statement. And it was true, right? Plastics were the future. And what I asked John, a couple of years ago, what are you investing in these days? And he said, The future is compliance, the compliance date, anything compliance, I'm investing in it. And that's when you realize that the train of compliance just never stops. And that just keeps coming. And they, and why are they doing it, they want tax money out of it. So taxes are gonna come out of it and all of that. So that's something that I think it'll be just just beginning to happen in Thailand, where we've had kind of a flood and a rush. But now the government's trying to figure out okay, how do we really manage this? And I think that's where definitely serious risks come into play? How would you summarize what you learned from this?

Peter Goldstein 27:25
Well, for one, check your emotions at the door. So ego and greed, don't have Interplay into making a sound investment. And the second, is, be cautious before you jump on a trend. Right, don't follow the crowd blindly to think that just because everyone's going in that direction, it actually to me is quite the opposite of be careful, and don't jump on the trends. That the other thing is really, I would say, two parts, understand your risk, really, truly try to analyze your risk. And that I think is the last one, which is get expert help. And if you don't understand yourself, there are plenty of experts that you can find and seek out that would either want to help, or you can engage with them and hire them professionally, to help so that you really do understand with expert advice, and risk management, how to make a sound investment.

Andrew Stotz 28:28
Yeah, that's, that's great learning. And I think it's valuable for everybody. Um, what I would add to it from my like, my angle on this is a little bit more crude. And that is, ladies and gentlemen, this is directed for all the entrepreneurs out there, starting their business. And that is, I'm sorry, but you are just a commodity. And as you go into business, you have all your dreams about how you're unique, and it's going to be this and it's going to be that but the chances are, you and your business are going to just be a commodity. And the only way to get out of that is through tremendous thinking about strategy, about positioning about how you're going to enter this business, what's going to be different about you and the discipline to follow that strategy. If you don't have a good idea about that. You have a lot of excitement about getting into an industry that's booming, but very quickly, you're going to end up being a commodity and commodities oftentimes just get crushed. That's what I would say I took away anything you would add to that.

Peter Goldstein 29:44
I think along those lines, Andrew is don't believe your own thoughts about how amazing or wonderful your product service technology or XYZ is, you know, pressure tests that stress tests that make sure that what you are really believing is received by the market to be true.

Andrew Stotz 30:07
So go out on the corner and start selling some weed and see how it goes. No, I graduated from Long Beach State. So I was living in Signal Hill and I was living at Cherry and Sixth Street, I think it was and have fond memories of Long Beach. But that was way before there was any weed there except for the you know, the black market weed. So based upon what you've learned from this story, and what you continue to learn, I want you to think about all those people who are getting into the weed space, what one action would you recommend our listeners take to avoid suffering the same fate?

Peter Goldstein 30:50
Don't believe the hype?

Andrew Stotz 30:52
Yes. Public Enemy? Was that public enemy that said that? Yeah, good. Exactly. One of the classic bands, hip hop from the days but yes, Don't believe the hype. Alright, what's a resource of your own of yours or any other resource that you'd like to recommend for the audience?

Peter Goldstein 31:16
Well, for me, I just published my first debut book. So for any of the entrepreneurs listening that would ever consider understand wanting to understand the IPO process, you know, it's the entrepreneurs IPO. And it's designed as a roadmap from insiders. So I have not just myself, but I, there's 12 chapters in the book. In each book, we have two industry professionals, those from very notable NASDAQ, New York Stock Exchange, London Stock Exchange, that are all giving practical advice to fill a knowledge gap for entrepreneurs that would consider taking their companies public.

Andrew Stotz 31:51
Yeah, and this just came out. i It shows on Amazon as November 21 2023. It's a new baby, hot off the press, ladies and gentlemen. In fact, I'm just looking at Amazon right now. And I'm going to add it to my cart. And I'm going to get that and read it. I'll have a link in the show notes, ladies and gentlemen. So you can get that resource and think about, you know, the pathway, I'm sure it's it's valuable, not only for people that say I want to do IPO. But hey, if you want to sell a stake in your company, or you want to sell your company to another company, it's probably almost the same pathway. So valuable stuff. I'm looking forward to reading it. All right. Last question, what is your number one goal for the next 12 months.

Peter Goldstein 32:43
I'm building a global community of entrepreneurs that want to learn and understand investing into micro and small cap companies. So we're launching in the next 12 months, you know, a informational site and provide our global community with more knowledge so that they can understand and participate in the upside of investing in companies at an earlier stage in their lifecycle. Exciting.

Andrew Stotz 33:11
And listeners. There you have it another story of loss to keep you winning remember, I'm on a mission to help 1 million people reduce risk in their lives. As we conclude, Peter, I want to thank you again for joining our mission and on behalf of at Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Peter Goldstein 33:36
It's been a pleasure. Good luck, everyone. Stay smart and stay safe. All right,

Andrew Stotz 33:41
and that's a wrap on another great story to help us create, grow and protect our wealth fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast shows Andrew Stotz saying. I'll see you on the other side.