April 23, 2021

The Returning Influence of Retail Investors: This Year’s “Sleeper Issue”?

The retail segment of shareholders had been holding steady around 30% the last couple of years, well below the 85% levels of the 1960s, before the dawn of huge asset managers. But now we’re in the age of stonks – and no-fee trading platforms. Although some are noticing that retail trading is slowing, there’s no denying that the number of retail accounts has swelled in the last year. Kris Veaco wrote me last week to say that it’s the fastest growing group of investors – some proxy intermediaries have noticed an uptick of 50% in email accounts compared to last year!

As I’ve noted a couple of times on our Proxy Season Blog, companies need to anticipate higher proxy distribution costs if they’ve seen a jump in retail holders. You may also need to brace yourselves for less predictable voting outcomes – especially with TD Ameritrade’s elimination of broker discretionary voting.

But there’s also an opportunity here – retail investors can be long-term, loyal supporters of management, and may also be enthusiastic participants in capital raises. This NYT article reports that some companies are rolling out the red carpet to welcome them – even changing the earnings release process to allow for more interaction with individuals. Here’s an excerpt (also see this Axios article):

After reported its quarterly results last month, executives at the company, which sells replacement auto parts, did what many of their ilk do: They held a conference call with Wall Street analysts, fielding questions about inventory levels, profit margins and corporate strategy.

Roughly 30 minutes later, the same executives were on Clubhouse, hosting an entirely different kind of audience. Their 2,000 or so guests had gathered at the buzzy online meeting spot to learn about the company. Their questions were far more straightforward. How did the business work? Why was able to offer lower prices than brick-and-mortar rivals? Were shares worth buying? isn’t the only company to do this – Restaurant Brands International also invited “customers & guests” to discuss Q4 earnings with its leaders on Clubhouse, and other companies are using podcasts and YouTube to reach the retail audience. Tesla has also been using the interactive “Say” platform for earnings calls for a while now – I blogged a couple of years ago about the impact that was having on the Q&A portion of the call.

The thought of extra conversations with different groups of investors makes me a little skittish – but as long as execs comply with Reg FD, it seems like it’s probably fine to do. Please correct me if you disagree!

New Director of SEC Enforcement: Alex Oh

Yesterday, the SEC announced that Alex Oh has been appointed Director of the Division of Enforcement. Alex was most recently a partner at Paul, Weiss – where she co-chaired the firm’s Anti-Corruption & FCPA Practice Group and had an extensive pro bono practice. She also has prior experience as an AUSA in the Criminal Division of the U.S. Attorney’s Office for the Southern District of New York, where she was a member of the Securities & Commodities Fraud Task Force and the Major Crimes Unit. Thank You – And More Trees!

I want to give a huge “thank you” to those of you who subscribed to our new blog on its very first day – we are so excited to begin this journey with you.

Our Earth Day launch offer of planting a tree for the first 422 subscribers was way more popular than we anticipated! We actually ran out of the allotted trees.

So we got more. Now, the first 1000 subscribers will have a tree planted on their behalf! Click here for your subscription and tree.

Liz Dunshee