Investing has changed. Our publicly-traded client companies have all had to evolve their messaging in recent years to talk less about earnings and more about concepts like Environmental, Social, and Corporate Governance (ESG), as younger and more environmentally conscious investors have driven companies to make more of a positive impact and to better communicate how their long-term vision is sustainable.
Environmental responsibility, social responsibility and good corporate guidance are somewhat easy to understand, and need to be properly resourced, but most companies find the concepts in no way unfamiliar and can easily operate within an ESG framework. This, however, isn’t the only adaptation companies need to make to connect with investors these days. Within the last year or so, retail investors – mobilized online through the WallStreetBets subreddit, public social media channels like Twitter and messaging platforms like Discord and Telegram, among others – have been able to make major moves in stocks. This has often been to the chagrin of those who had a short position against the company in question.
Enough has been written about whether this is a ‘good thing’ or a ‘bad thing’ – the truth is, it is ‘a thing’, and investors and companies alike need to understand it and adapt to it. What do you do, though, if your company becomes one of these ‘meme stocks’? On its face, if this happens to your company, it is in many ways a good thing. You can issue additional shares to raise capital; your brand gets a lot of press.
But how can companies turn these short-term traders into long-term investors? The emotional connection investors feel to these stocks comes through camaraderie and shared memes – and no matter how many diamond hands emojis someone might post, they can only be counted on to hold (sorry, I meant HODL) until the next meme comes along. One company, AMC, has recently created a portal on its website for individual investors:
AMC Investor Connect is the next step in the company’s strategy of connecting with these investors. The platform provides shareholders with exclusive promotions, like free or discounted items and invitations to special screenings, as well as direct communications with [AMC CEO Adam] Aron.
Going beyond free popcorn, AMC also made a $50,000 donation to the Dian Fossey Gorilla Fund – returning not just to the ESG theme that will remain important, but additionally a very clever nod to the WallStreetBets community that refers to Aron as “Silverback”.
As retail investment increases, this is a simple loyalty strategy for companies to better connect with these investors and encourage them to hold long-term. Your investor may already be your customer – exclusive content, discounts, and other perks gives them incentive to stick around as both. It is worth it for companies to remember that many of these investors came into the market hoping to quash the negativity of those who were betting on the shares of these companies to go down. Reward them for that faith in you, and they may stay.
If you’re still not ready to embrace the ways in which investing has changed, I recommend this Fortune article by Josh Brown titled Your Father’s Stock Market Is Never Coming Back. He describes how the game has changed and why, if you want to play, you need to keep up:
How do you explain stock market risk to someone whose only formative experience with it took the form of a 16-day bear market last March, about the length of time of an NBA Finals series? How do you convince newly minted investors that diversification makes sense when the first stock they ever bought, Tesla, rose 800% while everything else moved in slow motion? How can you expect them to respect their elders when their elders seem to be giving them horrible advice? “Don’t trade too often, don’t use margin, Bitcoin is fake, Tesla is overvalued, cannabis is a bubble, SPACs are a scam…” You are Charlie Brown’s teacher now – your admonitions have become background noise.
Personally, I welcome this – it’s refreshing, because it’s not the elitism of expensive research reports, the chart sorcery of Fibonacci retracements, or momentum-driven by high-frequency trades executed by machines. It brings with it a commitment to concepts beyond a company’s bottom line, and disincentivizes the negativity of short selling and wanting companies to fail. But it does require a new understanding of what motivates investors – and a complete re-think of what might make them loyal.
If you’re ready to take a fresh look at your investor relations programs, ESG reporting, or your customer loyalty initiatives, contact us to chat.