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Lured by the opportunities offered by internet communication, The Red Chip Review this month transformed its web site into a comprehensive source of data on small-cap companies.
The costly move represents the future for what is now RedChip.com. Founder Marc Robins and new majority owner Cruttenden Roth expect the site to generate revenue in a variety of ways. Robins said there will be no change in the independence of RedChip.com's research. Some observers, however, argue that those new services, along with underwriter Cruttenden Roth's ownership, threaten the objectivity and independence that has made Red Chip a trusted source of research.
The web site is designed to aid the do-it-yourself investor and the institutional investor, as well as to provide services for small-cap
companies-those with market capitalizations of less than $1.5 billion, Robins said. To date, the six-year-old Portland research firm has earned money by selling its independent investment reports to some 2,500 subscribers.
"We want to play Switzerland; we want to be the neutral site and the informational
crossroads for all players," he said .
But neutrality, or at least its appearance, may be difficult to attain now that RedChip.com earns money by providing a variety of services to small-cap companies, including some of the ones on which its analysts report.
RedChip.com intends to lot small-caps advertise on its site. It is hosting investor conference calls on the site, and it is charging participating companies for the service. It intends to allow Cruttenden Roth and other underwriters to make public offerings directly available to investors through the web site.
Also, RedChip.com has formed a new subsidiary, RedChip Partners, which advises small-cap clients on investor relations. Essentially, it tells companies how they can best portray themselves to current and prospective investors.
Meanwhile, as an investment banker specializing in small-cap companies, Cruttenden Roth routinely solicits underwriting, and often collects some fees in the form of warrants to buy common shares of the companies it takes public. Cruttenden Roth, a Newport...