A common desire of listed companies is to seek new, sometimes international, investment as a way to stabilise the share price and add a level of prestige to the register. While attracting new retail and institutional investors is part of every listed company’s journey it is not a ‘silver bullet’ and certainly not the only way to generate long term value.
Companies should start by having a close look at their existing share register, the quality and quantity of information being distributed and whether this information is consistent with the overall investment proposition of the company. Volatility is often symptomatic of uncertainty and creates a market for speculators.
This might sound basic, but it is surprising how many listed companies focus too much on chasing new shareholders, while neglecting those already on the register. BNY Mellons’ Global Trends in Investor Relations (2017) report showed that for 537 IR professionals across 51 countries the #1 concern was to increase engagement with existing shareholders, a distinct shift away from the previous aspiration of securing international ownership.
Once a company has reviewed its existing shareholder mix and what messaging has been distributed some gaps or inconsistencies will likely emerge and can be addressed.
A detailed share register analysis including beneficial owners should form the basis of a company’s entire investor relations program.
If a company doesn’t know who is ultimately responsible for making the investment, how can it expect to keep them informed and invested in the journey?
Now that the beneficial owners have been identified, it’s time to engage. An important note during this period is not to focus solely on those with the largest holding, the top 10 – 20 are likely not the ones requiring more dialogue. The real value of a register analysis is identifying those outside the top twenty and allocating resources towards keeping this group informed can dramatically improve the quality of a company’s register.
Existing shareholders can be a company’s biggest advocates, but if they aren’t considered they can become its most vocal detractors. Before seeking new, exotic investment the opportunity to shift the sentiment of existing investors should never be overlooked.