September 3, 2021

Shareholder Perks: Treasures for Tribbles

There’s been a lot of press recently about shareholder perks being offered by companies as a means of engaging with their retail shareholders.  Some companies, like Berkshire Hathaway, have been doing this kind of thing for quite some time.  In theory, it sounds like a great idea – and there’s certainly evidence that retail engagement efforts can pay off big time for some companies.  But listen, I’ve been there, and these things don’t always work out as planned.

I’ve blogged about how meme stocks like AMC have made efforts to cultivate relationships with retail investors by offering up various goodies, and this IR Magazine article says that other companies are engaging in similar efforts.  I wish them well, but I’ve worked with a lot of consumer products companies over the years, and I can tell you from experience that these plans sometimes go awry.

I’ll give you a quick example. One company that I worked with owned a variety of well-known consumer-oriented brands, and also actively cultivated retail shareholders. One of the things they used to do was place a plastic bucket filled with product samples under each seat in the auditorium where their annual meeting was held.  In one sense, their efforts were very successful, because lots of retail shareholders showed up at each year’s meeting looking for their goodies.  On the other hand, things got progressively more out of hand with each passing year.

How out of hand?  Many retail shareholders (who fit the stereotype of retirees with time on their hands) would arrive at the meeting early, scarf up their buckets of goodies, and then keep an eagle eye on the auditorium.  As the meeting progressed, several would periodically race around to the empty chairs and snag the unclaimed buckets that had been placed under them, and things really picked up steam after it adjourned. I’ve got to admit, it was pretty impressive – I’ve never seen 75-year old people move with such stealth & speed.  Ultimately, the scuffling for buckets became unruly enough that company ended the practice.  If I recall correctly, they abandoned it the year that the blue-haired buccaneers made off with every single bucket of goodies that had been placed under the directors’ chairs.

I could tell a few other stories about how efforts to cultivate retail shareholders got out of hand, and having spoken to other lawyers who’ve also worked with companies that appeal to retail investors, I know that my experiences aren’t unusual. But I think the key thing to remember here is this – all of our stories took place before retail investors multiplied like tribbles.  Today, you’ve got a bunch of companies with an outsized retail investor presence. That’s going to make all of these engagement efforts tougher to manage and potentially more likely to go off the rails – perhaps spectacularly.

John Jenkins