Unmuted

It’s a very different story now. You can log on to a platform in the afternoon and put your question directly to the chief executive or finance director. There are still barriers – some platforms allow the company to select the queries they want to answer, while others allow shareholders to vote on what they want answered – but this is a very different level of engagement to the annual general meeting (AGM) or occasional correspondence with an investor relations person. 

And it could be here to stay, thanks to the changes brought on by the pandemic and the investment boom. Some industry-watchers even say this shift could help solve the dilemma of UK investors unable to vote their shares held through the nominee system. 

For management teams more familiar with being queried about divisional margins and the kind of minutiae equity analysts obsess over, this might prove a big adjustment. But given the massive influx of new retail investors since early 2020, and an ongoing push to get even more people invested in shares, these changes could be part of the new, friendlier world of markets. 

This is not all for shareholders’ benefit. Access goes the other way too, and a shift from dry analyst calls to lovefests between bullish investors and executives could reduce scrutiny. 

An example of how pleasant these arrangements can be arrived in August, when US cinema chain AMC (US:AMC) held a shareholder Q&A. 

Questions for chief executive Adam Aron included whether AMC would team up with retailer GameStop (US:GME) to live-screen video game contests, or esports. This question received more than 30,000 votes representing 33m AMC shares – equal to around 5 per cent of the group's total issued share capital – according to session host Say Technologies. 

GameStop and AMC are perhaps the two most famous examples of ‘meme stocks’, which have garnered huge online followings and are bought up by mostly young and new investors, regardless of actual performance. This might make them exceptions – or possibly signposts – in the brave new world of engagement.

Aron said he would be “happy to reach out to GameStop and see if they have any interest” in a partnership. Nothing has come from this publicly, but Aron would have gained nothing from ruling it out, and it could yet prove to be a lucrative area for the company to move into.

Share trading platform Robinhood (US:HOOD) has recognised just how important this burgeoning channel of access is and announced a deal to acquire Say Technologies for $140m (£102m) a day after the AMC call.

United or divided?

Those kind of numbers – both deal value or shareholder participation in Q&A sessions – have not yet been reached in the UK. But there is movement here as well. 

“People tend to be a bit dismissive of retail shareholders,” says Peter Parry at the UK Shareholders' Association (UKSA). Historically, there is a good reason for this: no board or shareholder would want their company’s top people spending days fielding similar queries from the retail base. 

“It was never in any shareholder’s interest for a CEO and CFO to drive up and down the M1 seeing all these little people,” says Investor Meet Company founder Marc Downes. 

Through his platform, companies run presentations for anyone signed up to the website, where users post questions for management. These are not the most hard-hitting sessions but the point is retail shareholders can feel listened to and management teams get to explain their plans in detail. Data from the company show it has been popular, as clients have climbed from a handful to more than 400 in 18 months. 

Last week, platform users asked Shanta Gold (SHG) chief executive Eric Zurrin how soon a new mine would come into production (answer: we said five years a year ago, so four years) and how a study into this mine would be funded (answer: it’s less than $1m, so from cash), among other things. A July session, which followed a downgrade to production guidance and a revamped mine plan, was much more robust and saw Zurrin explaining why the company’s share price had tanked and what he would do about it. 

The mining boss says he was very keen to talk directly to retail investors. “Traditional analyst calls never leave space for retail to engage,” he says, adding that attendance on retail calls is usually three to 10 times greater than analyst presentations. 

Of course, analysts, institutional investors and journalists ask easy questions as well. As anyone who has listened to analyst calls will know, most questions from the research division of a big bank rarely stray from the format "great quarter, thanks for the time, I just had two questions around x". 

Roger Barker, director of policy at the Institute of Directors, believes retail shareholders can add something that professional company-watchers don't. 

“What retail shareholders can often bring is a very grassroots perception of how a company is performing,” he says, contrasting a loyal retail holder with a fund manager that holds “large, diverse portfolios”. Part of the challenge for boards, he adds, is the need to “extract the pearls” of constructive feedback and questions from less useful input. 

Beyond marketing

Investor Meet Company is not the only platform of its kind. Others, such as Proactive Investors, offer presentations with requests for feedback, although this is designated as being right for ‘sophisticated private investors’. But Downes says he is providing a space free from the “misinformation” that is spread on other online fora. “The narrative of the Q&A is controlled by the company,” he says. 

Such control could be a red flag. “It’s probably quite easy for these things to become a promotional exercise.... that’s not going to be popular,” says Parry. Popularity is also critical: is it shareholder engagement if you hold a presentation and no one shows up? 

Indeed, investor relations sources say not every company would benefit from a retail Q&A. That might be due to thorny issues that can't be discussed or because a company has too small a base of engaged retail shareholders. 

Downes says his platform already hosts large audiences, with more than 1,000 people watching at times. Few AGMs get more than a few hundred in-person attendees. Of course, a Q&A does not compare with a binding shareholder vote and if management can skip difficult questions that removes a degree of accountability. 

As AMC has showed, retail interest can also be unrelated to performance. Besides the GameStop joint venture idea, the top questions for chief executive Aron included a suggestion to sell AMC merchandise (“I think it would be profitable”, the questioner added) and the idea that the cinema chain expand into laser tag and bowling. Most AGMs and presentations don’t have that level of approachability. 

Then there is company complexity and bureaucracy. AMC's business model is entertainment. Simple. But what about companies such as Electrocomponents (ECM), which distributes industrial and electronic products, or a real estate investment trust? While they may have strong investment cases, engaging a more casual investor audience may prove a harder sell. 

Downes acknowledges that not all companies will not be presenting hugely compelling content. “[In some presentations] 20 minutes in you’re still not sure what they do,” he says. Miners, with their complicated drill charts and illustrations, are a case in point. “It means everything to a geologist, but nothing to me," he adds. "Show me a drone [shot] of something being blown up and a digger digging something out!” 

This raises questions about appropriate engagement and whether the line between promotion and holding Companies Act-required meetings is likely to get murkier. 

The UK Listing Review by Lord Hill, published earlier this year, included “empowering” retail shareholders as a goal, specifically to “improve retail investor involvement in corporate actions and their undertaking of an appropriate stewardship role”. 

Parry argues that this represents a perfect opportunity to look at the nominee ownership system, where UK investors hold their shares through a chain of financial institutions rather than direct ownership. This can make voting and attending AGMs difficult. 

Last year, the Law Commission submitted a scoping paper to the government on changing the rules on share ownership to help retail shareholders make use of their rights. 

“The intermediated holding system has made trading significantly quicker, cheaper and more convenient, but at the same time it has been the subject of criticism over issues of corporate governance and transparency,” the review found. It suggested a future review of voting rights for shareholders should bring in an obligation for intermediaries to arrange for "ultimate investors" to attend meetings. 

Ultimately, this could end with changes to the Companies Act to make AGM access and voting easier, if the government agrees with the commission. 

AGMs are “relatively unsatisfactory” in their current form, says Baxter, who advocates for a system that would look more clearly at the variety of stakeholders in a company, from major shareholders to retail investors and workers. 

Revolution not evolution

Access and engagement are two parts of the new investor landscape. But these are really just improvements on the recent past. The other change is opening formerly closed rooms for retail shareholders, such as initial public offering (IPOs). 

There are reasons these were largely off-limits. For one, retail shareholders aren't an efficient source of capital for companies looking for tens of millions of pounds. Plus, signing up to an IPO carries risks that are ill-suited to some ordinary investors.

This year has been a boon for public listings, however, and offers few horror stories. Even online food delivery group Deliveroo (ROO), which was initially seen as a car crash when it floated in March, has come back above its listing price. 

There was initial anger, though, as retail buyers using the PrimaryBid platform were locked in for a week after the IPO and had to watch investments of up to £1,000 tumble in value. However, retail broker Hargreaves Lansdown saw no major surge in trading once this week was over, suggesting the 70,000 buyers did not all run for the exits at once to crystallise their losses. 

Parry believes retail buyers should have access to these risks. “There was a feeling that the City institutions and directors were getting an opportunity to buy shares at a discount,” he says. 

PrimaryBid is backed by the London Stock Exchange (LSEG), which took part in a funding round last year and is keen to help listed companies broaden their approach to funding. In recent months Crowdcube has announced plans to move into public markets, offering IPO access, as well as continuing its decade-old model of punters handing money to early-stage companies. This is another danger area for retail investors, as there are few rules around what a company must declare in terms of its accounts and strategy. It does offer direct contact with the company but potential investors have to know which questions to ask. 

The risks come not just from handing money to a company promising the world, but also the lack of an exit option for shareholders. The fall of Neil Woodford, whose equity income fund was suspended by its authorised corporate director Link Fund Solutions because of a lack of liquidity, demonstrates this. 

On top of its IPO plans, Crowdcube offers a service for buying and selling private company shares (currently in beta, or pre-official release stage) called Cubex, which “collects information on the price expectations of prospective buyers and sellers” to arrive at a price. This isn't so different from a public market, but the bid and offer process may take weeks instead of seconds. 

If a user wants to buy shares in challenger bank Revolut (which was valued at $33bn in its latest funding round), for example, they put their hand up and declare how much they want to buy or sell and wait for enough interest to ferment in order for a share price to be determined and counterparty found. 

All these moves have been doable technology-wise for a long time, it’s just that greater interest in investment coupled with more confidence in handing over money online has driven these new options. 

The actual technological advances of recent years are important too. Here we come to an area that is seen as the financial tool of the future: blockchain. We’re some years into this being part of the lexicon, but the actual use case of a decentralised system where trading can be done without a central clearing house is still somewhat murky. 

Blockchain has often been a “solution in search of a problem”, says tZero interim chief executive Alan Konevsky. His firm offers a marketplace for “private digital securities”, and has a handful of private companies listed for investment, including a resort in Colorado and a cryptocurrency exchange called Exodus. 

The trades still have to go through a broker, however, and peer-to-peer transactions are not allowed, as per the resort’s prospectus. 

Asked if this system of digital tokens for private companies was just like a public stock exchange, Konevsky says tZero’s digital securities address “a particular market need for liquidity for companies that have not decided to list on a public exchange”. He says as the digital ecosystem evolves there will be “greater convergence across the technology that will power private and public capital markets”. 

This convergence has already been seen in the world of meme stocks, where public companies have flirted with cryptos. This is separate to Konevsky’s point about structural market changes, but points to the crossover between retail and management interests. 

Last week, AMC chief executive Aron asked Twitter to determine which cryptocurrency people might use to buy movie tickets. When the winner came in – Dogecoin – his response was: “Now we need to figure out how to do that. Stay tuned!” Such feedback loops, where social media votes appear to determine corporate strategy, is not an ideal portent for greater retail investor engagement.

But at least the open communication channels mean investors will find it easier to give feedback on this type of behaviour.

And as greater numbers of once-closed financial market doors are opened, claims of democratisation will only grow. Crowdcube boldly announced it had already democratised investment into private companies andtZero makes similar appeals.

Where this popular will might lead is an open question, but the revolution won't be all drama. At AMC's August Q&A, interest in the question regarding a tie-up with GameStop was only the second-most-supported query. ‘Do you have any plans to offer a dividend again?’ landed twice as many votes.

New technologies. Same old investors.