Q- What is the rule of thumb when trying to attract retail investors into the stock? We’ve never directly targeted this audience but we’re noticing more interest since we increased our dividend, and I know these investors tend to be long-term holders.
A- Companies quite often overlook retail investors, and they do tend to be long-term holders. The fact that your company is a dividend payer makes it attractive to this group.
There is no ‘rule of thumb’ when it comes to retail investor work. Some will point to certain levels of ownership and the dedicated resources needed to service them, but each company traditionally has its own retail investor base profile. Well-known and easily understood companies, like consumer product companies, tend to attract ‘mom and pop’ investors.
Perhaps the best and most efficient way of reaching this important market is through BetterInvesting, a non-profit organization providing investment information, education and support that empowers its members to become successful lifetime investors. BetterInvesting has almost 100 regional chapters that plan, organize and present investment seminars, workshops, computer events and investor fairs throughout the year.
Another strategy for generating retail ownership is through the establishment of dividend reinvestment programs, also known as DRPs (pronounced ‘drips’). If your company doesn’t have such a program, you should look into starting one.
Q- We recently had a situation where an analyst wanted to verify our quarterly forecast right around our reporting date. I smelled danger, so I suggested he look at our previous release to answer any questions. This analyst is new to our industry and probably fairly inexperienced, as he asked for this information in a very casual manner. I am just wondering how IR should head off this type of thing, because it would be easy for a less experienced IR person to succumb to such a request. Any thoughts?
A- You should also beware of analysts who know better but are looking for that slip-up to gain an advantage over their peers.
To get around this, most companies have what is commonly referred to as a ‘black-out period’ in which management does not comment about earnings as the company’s reporting date draws closer. If your company does not have such a policy in place,you may wish to revisit this issue.
The request would be less sensitive if you had been asked to affirm a previously issued press release not so close to your reporting date, provided you did not comment any further on the accuracy of the forecast. But, given the timing, your response could be deemed as an affirmation of previously issued guidance and a possible Reg FD violation. The best advice is to seek the opinion of your legal counsel before treading into this reporting gray zone. So, when in doubt, ask a lawyer.
