Not So Dumb Money: Retail Investors Are Here to Stay

The re-emergence of Keith “Roaring Kitty” Gill and the shareholder vote at Tesla have once again drawn attention to the role of retail investors in the markets and their effect on shareholder votes. And while we are reluctant to predict the long-term impact of the Kitty’s roar, we believe the trend towards more active and engaged retail investors appears here to stay.

Lion wearing glasses roaring in front of a computer screen

Stock trading clubs, messaging groups, and chat forums continue to proliferate, and retail investors’ ownership of shares climbed above 30% in 2023. Millennials seem poised to have the biggest impact as they continue to grow their investment portfolios. According to Broadridge, millennials are the fastest growing generation of investors, both in numbers and investible assets, and are more likely than other generations to maintain a self-directed brokerage account. Additionally, millennials stand ready to inherit $90 trillion of assets, which would likely make them the richest generation in history.

Historically, most investor relations programs have not been geared to retail because of retail’s tendency not to vote in shareholder elections, and the difficulty in identifying and directly reaching the individuals making the investment decisions. Recent trends, however, suggest a shift. Moreover, technological changes and the availability of data give companies an unprecedented ability to learn about, engage with, and cultivate an engaged and loyal shareholder base. By doing so, companies can leverage untapped potential to improve voting results, build their brand and reputation, and mitigate activist threats.

Whether they are expecting a controversial shareholder proposal, a potential activist, or another ho-hum annual meeting this year, companies would be well advised to develop the ability now to maximize their relationship with retail shareholders. Of course, not every company has a “Roaring Kitty” or a famous CEO like Elon Musk, but all companies have the ability to take steps today that can enable them to benefit from the increased engagement of retail investors:

  • Don’t fear the unknown, learn what retail investors want to hear from you. A wealth of untapped data is available to companies and can be used to mine attitudes, demographic trends, and other useful information that can inform your IR efforts – and help you better understand who is likely to cast a favorable vote.
  • Keep a pulse on the conversation and how you’re perceived. Don’t wait until you’re in the throes of a proxy battle. It can be immensely valuable to find out where your retail base is actively discussing the company, take stock of what resonates with them, and leverage your investor communications program to address any information gaps.
  • Identify the best platforms and tools to communicate with your retail investors and construct the applicable messaging. Many votes can be influenced – and in some cases won or lost – on digital battlegrounds, including digital and social media campaigns. Establishing those channels now can give you a leg up if you ever face a challenging vote.
  • Engagement today will pay dividends tomorrow. Give retail investors a voice, a sense of engagement, and build the relationship. Retail investors can be a tight knit community, and favorably inclined shareholders can be your greatest ambassadors when you need them most.
  • Build a steady drum beat of news and be patient. Retail investors will invest in and support companies they believe in, but a lack of communication can undermine confidence and breed misinformation. A robust pipeline of substantive news can keep you top-of-mind and build rapport with retail investors.

If the trends are any guide, the days of ignoring retail shareholders are numbered, and the time to engage is now. Sitting back and waiting for a contested situation squanders the opportunity to create an edge now that will improve voting results each year and make you far better prepared if and when an activist comes knocking.

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