Recent events have highlighted the fact that millions of retail investors are gathering online in chat forums like Reddit to discuss public companies every day and millions more are investing in the public markets for the first time. While the phenomenon of retail investor relations is nothing new, the dynamics may have changed. With this in mind, now is a good time for IR teams to refresh their digital investor relations strategy.
Q4 and IR magazine hosted a webinar to explore the ways in which a company’s story can be told in the digital medium – through the IR website, across social media, in videos, and other media. Moderated by Tim Human, Senior Reporter at IR Magazine, Q4’s VP of Global Partnerships and Alliances, Mike Coffey, and Andrea James, SVP Corporate Strategy and Investor Relations at Axon Enterprise, shared tips and best practices for thinking about, and improving communication to retail shareholders.
The Growing Influence of Retail Investors
The last few years have seen a boom in retail trading, and the pandemic has only served to escalate that trend, according to Mike: “The perfect storm of working from home, commission free trading, stimulus checks and [the ubiquity of] social media platforms has made this group a real force in the marketplace and one that cannot be ignored.”
In fact, a recent NY Times article cites the Federal Reserve as reporting that American households bought roughly $211 billion in individual stocks last year — the highest level since 2014. With tens of millions of new retail investors in the market, organizations must at least examine the impact this is having on their investor communications.
Investors Gathering on Reddit
Panelists also discussed the recent explosion of interest in stocks on Reddit and other websites, leading to significant volatility for some companies. Mike shared his thoughts on the influence of this new group of investors and how that might impact the shareholder base.
“This new group has had quite an influence on many stocks and a profound impact on institutional investors as well as regulatory bodies. By acting in a pack, I would argue that they have had as much influence as a sell-side analyst in many stocks. And, as big an impact as it’s had on the retail crowd, I would argue that they have had an even bigger impact on institutional investors especially hedge fund managers. The GameStop example has forever changed the way that hedge funds and short sellers trade. They simply cannot ignore the chatter on social media platforms anymore.”
Andrea discussed Axon’s experience engaging directly with Reddit and the success they saw from their CEO, Rick Smith, hosting an “Ask Me Anything” session on the platform. Though it wasn’t originally intended to engage institutional investors, Andrea received great feedback on the format and its ability to benefit this audience.
“While this wasn’t really an IR event, what I found was, some of our largest shareholders on the institutional side really enjoyed it and asked for more of this type of communication. It was a great example of something that’s good for retail investors also benefiting institutional holders and vice versa.”
Andrea also looks to her experience in advising IROs to be prepared for this increasingly savvy audience: “You have to be willing to engage with the most challenging question that could be asked of our company, because if you ignore the hard stuff, Reddit will see it.”
As such, Andrea recommends that IROs have an honest conversation with the management team on this question and how the company would address it in a public form, well ahead of this type of engagement.
The Evolution of Digital IR
Many IROs are already taking a proactive approach, recognizing the potential impact of the growing influence of retail investors. Mike reports Q4 teams observing a significant uptick in requests for social media monitoring, as more and more companies recognize the need to understand what retail investors are saying about their stock and the impact that is having on valuation.
In this new environment, IROs need to consider an updated approach to retail communications and address the concerns of this audience. Andrea reminds that, especially on the digital front, many efforts intended to benefit institutional holders actually end up serving retail investors, as well. For instance, she stresses the importance of making information easily accessible online, noting that Axon issues a robust shareholder letter online each quarter and has recently added a quarterly earnings video to the mix. These and other examples illustrate the added benefit digital presents in allowing organizations to address multiple audiences from one platform, without length limitations.
Regardless of the audience or platform, though, the content and story remain a key focus. Andrea stresses that IROs should assume that each quarter brings new investors to the company story who may need greater clarity on specific aspects of the story, which IROs should work to address.
Of course, the recent influx of retail investors isn’t the only force changing digital programs. COVID-19 restrictions have also forced companies to rethink their approach to IR, including digital content. Andrea discussed this adaptation of digital content over the past year highlighting the continued importance of writing, but also the trend toward visual formats like video. She also makes the important point that these recent influences have driven notable improvements in production levels and a more sophisticated approach to digital content.
Leveling the Playing Field
Ultimately, recent events have increased the industry’s focus on digital IR, helping to level the playing field between different types of investors. Andrea believes that digital content should be created for a range of audiences and says that there are some very easy ways to make it more user-friendly for all of them. One is simply making content more accessible – especially to an increasingly sophisticated retail audience.
“Making transcripts available on your IR website is low-hanging fruit. A retail audience might not have access to a Bloomberg terminal and this, as well as keeping event pages updated and paying to make financial conference webinars available on your website, are all easy ways to provide additional access to all of your shareholders.”
“I think you certainly have seen a more level playing field,” Mike agrees. “Retail names have access to senior management teams more than they ever have. And, in many ways, the retail space has demanded it. We see a future in which a corporation can communicate to all shareholders virtually through earnings, investor days, ESG days, annual shareholder meetings, and doing that on one simple platform.”
To hear more about these and other best practices for managing through the evolving environment, watch the replay of this webinar “Don’t let Reddit own your story: Best practices for Digital IR.”