Loyal3, the San Francisco-based start-up that helps customers become shareholders, is adding 10 new companies to its platform this month and expects to have more than 50 on board by mid-March, indicating the business is starting to gain traction.
The firm has not yet confirmed which companies have signed up in January but IR Magazine understands they include a number of well-known technology names.
Loyal3’s platform, which allows companies to sell stock easily and affordably, is also being rebranded as a social stock plan (SSP). Previously it was known as a customer stock ownership plan (CSOP).
Prior to this year, Loyal3 had only one company signed up: fashion maker and retailer Fifth & Pacific Companies. In 2011 the start-up announced a partnership with NASDAQ to sell CSOPs, although that deal came to nothing.
Loyal3 allows companies to sell stock for as little as $10, in three steps and with the fees being picked up by the issuer. The idea behind the scheme is that customers who are shareholders spend more than non-shareholders: research from management consultants Bain & Company says shareholders spend 54 percent more than ordinary customers.
To attract online shoppers, participating companies can add a Facebook app to their page on the social media site through which stock can be bought.
For the issuer, Loyal3 says SSPs will help attract a new group of long-term shareholders who are easily identifiable. Barry Schneider, CEO of Loyal3, says SSPs make sense for ‘any company seeking to increase demand for its shares from buy-and-hold investors’ as well as ‘companies seeking to get past the street name wall of secrecy’.
This spring, Loyal3 also expects to push on with its plan to allow participation in IPOs from $100. Securities law prevents disclosure of which companies might take part, but Loyal3 will list them on its website once they have filed with the SEC, says Schneider.
The charge for SSPs is based on a monthly fee for the first 1,000 investors, then a per-user fee for each additional investor, with a cap on the total cost. SSPs have the same regulatory platform as a direct stock purchase plan, notes Schneider.
Frontier Communications, the NASDAQ-listed provider of telecoms services to rural and smaller communities, is set to launch Loyal3’s platform in March. Maggie Wilderotter, CEO and chairman of Frontier, says the service is aimed initially at employees.
‘We believe this benefit eliminates fees our employees would incur if they just used a broker or another online service,’ she explains in an email. ‘We plan to extend this offer to our top customers later in the year. Again, we believe in the premise that ownership drives loyalty and we will test providing shares for loyal customers as well.’
She adds that the service ‘democratizes the equity market’ as ‘most individuals are intimidated about trading’.
