Companies Zoom In on Small Shareholders Amid Retail Trading Frenzy
‘We want to let them ask us anything,’ a CFO of an online
car-parts seller said of its individual investors
Chip maker Qualcomm uses Twitter to share its results, using the
social-media platform as a way to reach small shareholders.
PHOTO: ALY SONG/REUTERS
March 1, 2021 9:00 am ET
The recent surge of small investors into some
companies’ stocks is pushing investor relations departments to seek
ways of engaging with their new shareholders.
Shares of videogame retailer GameStop Corp. ,
movie-theater chain AMC
Entertainment Holdings Inc. and
other companies skyrocketed in late January when individual investors bought
their stocks in a social-media-fueled frenzy. Certain companies, including AMC, took
advantage of the surge in demand for their stock and sold new shares
and cut their debt loads.
Since then, many individual investors have sold their shares,
often at a loss, though GameStop and stocks of some other companies saw a
resurgence last week. Regulators are looking
into what caused the frenzy in January and whether market
participants played by the rules. It is unclear whether
major policy changes are on the horizon.
The retail mania is prompting companies to get a better
understanding of their shareholders and how they can connect with them. They are
reaching out to individual investors through special events, podcasts,
social-media channels and charts, while also keeping the lines of communication
open for institutional investors.
AMC and GameStop didn’t respond to a request for comment.
CarParts.com Inc., a
Torrance, Calif.-based auto-parts seller, in late January saw its stock price
rise more than 53%. The shares rose further in early February before giving up
some of the gains, and were trading at $18.05 on Friday, up from below $13
before the rally. The company, which is largely owned by institutions, plans to
host a separate event for small investors in the spring, Chief Operating and
Financial Officer David Meniane said.
David Meniane, operating and finance chief at CarParts.com.
to let them ask us anything,” Mr. Meniane said, adding that retail investors
weren’t seen as a group that could move the stock market until recently. “That
has changed, and it is great,” Mr. Meniane said. CarParts.com wants to be
approachable for all investors, he said.
Kimberly Esterkin, an investor relations professional, said she
is advising her clients to engage with retail shareholders. “You’ve got to be
willing to take their questions; you’ve got to be responsive,” she said,
especially since they often are investing their own funds.
For some of her clients, as much as 50% of daily trading volume
is driven by individual investors, said Ms. Esterkin, a managing director at
Addo Investor Relations, a strategic communications and advisory firm in Los
Angeles. “I have been noticing this surge since last March,” Ms. Esterkin said,
adding that work from home during the pandemic and commission-free trading
platforms have added to the demand for stocks.
OTC Markets Group Inc., an
operator of stock-trading platforms that largely caters to trading in small and
midsize companies, said it is adapting to growing interest from individual
Share-trading volumes on OTC Markets’ platforms were up more than
fourfold in January from the same period last year, according to Jason
Paltrowitz, executive vice president for corporate services at the company. In
February, the volume of traded shares surged to 1.58 trillion, up from 86.49
billion during the same month last year, OTC Markets said.
“We have seen significant increases in participation from retail
investors, but also more outreach from companies,” Mr. Paltrowitz said. The
market operator is offering companies the chance to participate in video and
podcast series as well as virtual conferences for investors.
Individual investors sometimes can be less knowledgeable about a
company or the perils of the stock market in general, investor relations experts
said, making it necessary for their clients to provide educational materials and
adjust marketing strategies to speak to these groups.
Many of these new investors rely on recommendations from people
in their social or online networks and follow finance and investing sites like
Seeking Alpha, Investing.com or NerdWallet.
“We are building influencer strategies, working selectively with
some of these influencers to inform and educate the growing pool of capital
represented by retail investors,” said Rachel Carroll, president and managing
partner at Edison Group, an investor relations company.
Akash Palkhiwala, chief financial officer of Qualcomm.
PHOTO: QUALCOMM INC.
VIQ Solutions Inc., a
provider of audio- and video-capturing services whose shares trade on one of OTC
Markets' platforms, in recent years has focused on providing easily
understandable investor handouts and instructing small shareholders where to
find them. “Retail investors like to write about their experience with a company
in their networks or on social media,” said Sebastien Pare, VIQ’s chief
Mr. Pare said he has noticed shorter holding periods of his
company’s stock in recent months among small investors. “There is an early flip
once a little profit has been made,” he said. VIQ’s shareholder base is split
half and half between retail and institutional investors, according to Mr. Pare.
Even CFOs at big companies whose shares are mostly held by
institutions recognize that shareholder interactions are changing. Akash
Palkhiwala, the finance chief of chip maker Qualcomm Inc., said
the company is communicating actively with its shareholders.
“Social media is another way to get to retail investors,” in
addition to conventional means of investor communications like earnings events
and press coverage, Mr. Palkhiwala said. Qualcomm, for example, is using Twitter
to share its results with followers. “Hopefully that gives us some more exposure
to them,” he added.
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