Patricia Baronowski-Schneider
Pristine Advisers
New York, NY
Patricia is CEO of Pristine Advisers, an IR/PR/Media Relations/Marketing firm with 33 years of experience working her way to starting her own Company a decade ago. She can be reached at pbaronowski@pristineadvisers.com
Most IR/PR strategies revolve around striving to build meaningful relationships with institutional investors. And rightly so, since institutional investors are key to the growth and success of a company.
However, in recent times, the retail investors have also become a significant force that you must definitely consider while strategizing your IR/PR policy. A recent report revealed that while retail trade was just 10% of the market in 2019, it is now over 25% of the daily volume; which is a significant jump in just under a year and a half.
It is true that a single retail investor cannot cause any harm to your business, however, put together, the retail investors assume a prominent position. Together, retail investors, might be capable of price swings and even causing damage to market reputation.
If you are still ignoring the retail investors, then you must stop right away and take notice of them. And, the first step is to truly understand your retail investors. They are very different from institutional investors in all aspects. From their understanding of your business to their investment goals, they are stark apart from institutional investors.
Here are 3 things you must know about your retail investors –
- Retail investors ‘value’ your business differently than institutional investors
An institutional investor conducts due diligence before investing. They will look at analyst reports and study in-depth your financial statements and investor presentations among other things. They would want to know more about the management team and their competence. However, your ‘average’ retail investor is very different. They are rarely going to look at any of the data or statements you have released publicly. Their way of ‘valuing’ your business is very different from an institutional investor since their knowledge and understanding of your business (or, industry) is very limited.
- Retail investors have access to different information than institutional investors
Since a retail investor has limited access to data about your business, he is going to seek information from sources such as social media, forums, online news websites, community groups and more. The information available at these sources is highly unreliable unless they are sharing data that is genuine, vetted and authorized by your company; which is hardly ever the case. A retail investor is going to form a perception about your business based on such information; hence, they can often have a wrong, damaging perception about your company.
- Retail investors react differently than institutional investors
You can more or less anticipate the reaction of your institutional investors to any news or update about the business since they have access to the same data as you; and, are on the same page with you. However, a retail investor may react very differently and it is also difficult to predict their reaction. Their limited understanding of your business/industry, limited access to important data and high probability of being influenced by fake, unregulated news can be a cause of worry for you.
Hope this has been an insightful read. Next week, I am going to share with you a few things you can do to achieve IR/PR success with your retail investors as well.
Wishing you good health and success.