Connecting With Small Investors Remains A Challenge

Connecting With Small Investors Remains A Challenge

Last year, the meme-stock craze brought small investors pouring into the market, but companies are still struggling to connect with those smaller shareholders 12 months later, reports an article in The Wall Street Journal.  The surge in stocks a year ago boosted trading volume up to $2.45 trillion in U.S. stock exchanges, and retail ownership increased to an average of 18.5% by the end of last year. But despite new apps and tools that analyze data about those investors, companies are still finding it more difficult to communicate with them than institutional investors.

Retail investors are getting smarter, and widening the types of investments they’re making, the article continues. Many companies are making concerted efforts to reach out to their smaller investors, through one-on-one conversations, being available for direct communication, and allaying fears over volatility in the market. Cinedigm Corp., which used to be majority-owned by a Chinese private-equity firm, was discovered by retail shareholders who now own more than 4% of their 170 million shares. That shift led to an adjustment in their communication strategy; they now strive to interact with those investors on a more frequent basis and are working with an outside investor-relations firm.

Some companies prefer to speak to investors over the phone, in order to avoid having their email communications copied and pasted on social media. It can be a challenge to discover what their investors’ preferred communication tool is, the article maintains. Additionally, companies are utilizing data-tracking tools to single out individual shareholders and gather information about them. They’re also experimenting with posting videos and other communications on social media, but whether these posts result in higher trading volumes or share prices is unknown. Basically, it’s still a mystery what’s working to reach small investors and what’s not.

One-on-one communication is expensive, and many investor-relations experts are advising against spending too much energy on them, especially if the investor holds less than 100 shares. Some companies are instead holding special events for individual investors to grow their retail shareholder base, targeting wealthy individuals, while others are working with influencers to find more retail investors through social media. Companies with consumer-facing products are finding it easier to attract shareholders, pulling from their customer base, with a popular approach being giving a discount every time they buy.

Some companies are even venturing into the world of TikTok to reach investors. And as 2022 progresses, businesses are going to continue to throw things at the wall and see what sticks, the article concludes.