Rise of the Retail Investor

Rise of the Retail Investor

Panelists:
Dan Aldridge, Managing Partner, Asbury Investor Relations
Nicole Maselli, Head of Sales, Stockperks
Jason Rechel, CFA, Head of Investor Relations, Sprout Social, Inc.

Moderator: Mike Coffey, Vice President, Head of Global Partnerships & Alliances, Q4 Inc.


KEY TAKEAWAYS
  • Nicole Maselli of Stockperks, which offers an app to connect companies with their retail shareholders, presented data on the new power of individual investors. Individuals’ average daily net buying increased five times to $1 billion in 2020 – and is projected to increase another 30% by mid-2021. Retail now accounts for about 20% of all trading volume, and individuals collectively hold $20+ trillion in equities across more than 100 million brokerage accounts. While these numbers had been growing strongly well before the pandemic, the flexibility of working from home and new trading platforms have facilitated this trend. However, and contrary to popular opinion, 90% of the newest retail investors trade fewer than three times per month. Some 22% of new retail investors are under age 30, compared with just 3% before 2020.
  • For investor relations officers, what may be the most significant trend is that these younger investors are far more likely to purchase stocks rather than mutual funds, unlike their Baby Boomer and Silent Generation counterparts. Furthermore, Generation Z will inherit trillions of dollars from their parents in the coming years and are more likely to move at least some of that money into individual stocks.
  • Dan Aldridge considers the rise of the retail investor to be “a complete paradigm shift for small- and mid-cap companies,” and advised IR officers to proactively engage with buy-and-hold retail investors, whom he distinguished from short-term traders. While retail investors are more likely to vote with management, he also acknowledged a dramatic increase in retail positions would increase proxy season costs and potentially, require multiple operators on your earnings calls to accommodate increased demand. However, “these are sophisticated investors and 90% of their questions are the same ones you get from the buy-side.”
  • Jason Rechel explained that Sprout Social became a public company in 2019 and as a social media management software company, is particularly attuned to what is being said on Twitter, Reddit and other platforms and chatrooms. “What you hear on social media can move the economy in one to three days,” he said, and “anyone can ask a question on social media,” making your earnings call just one venue to tell the investor relations story and address concerns about your company’s performance and risks as perceived by investors. He reminded the audience that institutional investors also are active on social media. Sprout’s proactive investor communication includes posting pre-approved tweets during earnings calls and investor day (e.g., published numbers and quotes from the earnings release).