Home Business News London listed companies must improve retail investor engagement to close the US valuation gap

London listed companies must improve retail investor engagement to close the US valuation gap

28th May 24 12:27 pm

InvestorHub calls on London listed companies to increase and improve communications with investors as they reveal the real ‘elephant in the room’ behind valuation differences with the US – its market practices, not a lack of government support or regulatory measures.

With general elections known to impact the volatility of the London stock market, InvestorHub is urging listed companies to engage with their investors directly over this period to help them understand any impacts on their business.

InvestorHub has helped over 100 listed companies improve their investor engagement, shareholder retention and acquisition by allowing companies to build direct relationships with their retail investors. It has provided practical steps that listed companies need to take.

Retail investors are the marginal buyers and sellers for most listed businesses. Yet, the City is focused almost entirely on institutional investors, pushing the message that retail investors are not important. Even though most companies on London’s AIM don’t have sufficient liquidity to garner the interest of institutional investors, let alone complete a meaningful capital raise.

In Australia and the US, listed companies are acutely aware of how fundamental retail investors are. They are the foundations of our market and successfully engaging with them is the first step to bringing back more serious institutional investment and accurate valuations.

The UK market is highly intermediated. There are many more third-party service providers that are owning and controlling the message instead of companies forming relationships themselves. This means that frequency of retail communication is limited by the costs of engaging a third party.

Companies are generally advised not to talk to retail investors unless they have good news to share – and in some cases not at all. This is at odds with the approach they take with institutional investors, and yet we are still surprised when retail investors baulk at bad news, compounding poor performance.

Even the companies that are attempting to engage with retail investors are doing so by hosting the ‘status quo’ bi-annual webinars. It is unrealistic for us to expect to compete with US companies when we are so infrequently ‘selling’ our stories.

UK companies are still treating digital channels as a chore or box-ticking exercise rather than taking advantage of their power to connect with investors at scale. These are simple measures – having a good website, collecting first party data, using email and media effectively, using data to inform your strategy.

The technology and access now exist for a listed company to manage the entire sales funnel for retail investors without needing to pay costly third parties.

There is also little effort to measure the performance of digital channels in engaging with investors, or to seek and capture feedback to improve digital investor communications.

Finally, UK companies need to capitalise on social media channels, and not just post results or generic content. The average British is more likely to be able to name US CEOs instead of our own PLC leaders. That needs to change.

Alex Stella, COO and UK Head of InvestorHub, said, “Investor relations in its current form is not working, especially in the UK where valuations are well behind other markets. The technology used to allow retail investors to purchase shares in listed businesses has advanced rapidly, whilst the technology used for subsequent communication and engagement has stood still.

“Part of the reason for this mismatch is the disconnect between listed businesses and their investors. Intermediation is stubbornly high in public markets. The way to get British investors excited to invest in great British companies is to bring them closer. We should be treating investors as well, if not better, than we do customers.

“Very few businesses can communicate directly with their retail investors. Unfortunately for them, these are the investors that do more to influence their valuation in the long-term than the top shareholders.”

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