Analyst coverage of micro-cap stocks expected to decline over the next 12 months – survey

Small and microcap stocks are a more transparent alternative to private equity investments, according to a survey of private investors in the US and Europe.

Five in six professional investors (83%) see smallcaps and microcaps as more transparent due to their real-time pricing, greater liquidity and lower fees, a survey carried out on behalf of MBH Corporation Plc (FRA:M8H)(OTCMKTS:MBHCF).

What’s more, the level of coverage for the micro-cap market by brokers and research houses is expected to decline over the next 12 months, according to 42% of the investors surveyed, with 5% anticipating a dramatic fall.

This feeds into a belief of 40% of the investors that the cost of obtaining information and monitoring small and microcaps will continue to increase over the next three years.

Coverage of the microcap market by brokers and research houses has fallen in recent years, partly due to MiFID II regulations, noted Callum Laing, MBH’s chief executive.

“Our research shows that many professional investors expect this trend to increase, which will make it even harder for them to spot potential small market investment gems.”

The survey was conducted among 117 professional investors, of which 73 were in the US, 30 in the UK and 14 in Germany.

The survey was conducted between November 17 and 22, 2020.