Do Retail Investors Matter?

A recent survey by Thomson Financial noted that only 18% of 102 investor relations officers (IROs) surveyed actively court individual investors and that less than 25% had plans to begin doing so in the near future. In a report on the survey, IR Magazine, noted that while some IROs believe individual investors can add to the stability and diversity of their company’s investor base, many do not think the effort is worth it, citing the tribulations of dealing with mom-and-pop investors who might panic with downward price movements, bombard companies with questions and increase the risk of securities class actions.
 
However, for a public company that is largely held by institutions, increasing the retail base might not be a bad idea. Increasingly, large institutions and mutual funds are becoming activist in nature and many are opposing proxy initiatives. The National Association of Investors Corporation (NAIC) notes the following characteristics of retail investors:
 

  • On average, NAIC’s 119,000 members hold a stock for at least four years (that is much, much longer than the average institution holds a stock).
     

  • The combined portfolio value of NAIC members is $70 billion.
     

  • Cumulatively, NAIC members invest approximately $75 million of new capital per month.

 
So, if you’re an IRO looking for a way to bring new interest into the stock, it might be worth investigating some of the retail-oriented investor communications programs that are available to help you reach this powerful group of long-term investors.

 

Laurie Berman, Senior Vice President, lberman@pondel.com