Solving the Common Problem of Listed Companies and Retail Investors

Guest Blogger: David Coe, managing editor of Investor Torque

Once again, we welcome David to The Digital Dredge in preparation for our May 10 Webinar on how Social Media is changing Investor Relations in Mining.

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This blog was originally posted on David Coe's LinkedIn page. Investor Torque supports investor social media campaign by telling the story in many ways: LinkedIn profiles of your executives, animated business videos, information graphics, on-camera interviews, landing pages, and investor presentations. You can connect with them at www.investortorque.com


Listed companies that fall outside the mandates of institutional investors have a problem - they need retail investors.

They are also likely to be outside the universe of stocks that brokers cover and off the list of financial planners’ approved investments.

That means junior companies really need retail investors. But retail investors also have a problem. They don’t have the time or resources to track every company and every announcement on the ASX. That means share prices don’t always reflect all available knowledge.


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The good news is that a single solution can bring together junior listed companies and retail investors.

That solution is social media – but we aren’t talking Facebook, Snapchat, Instagram and other channels that celebrities and the media fixate on. We’re talking LinkedIn, Twitter and corporate blogs that retail investors are turning to as free alternatives to expensive news feeds from Bloomberg and Reuters.

Companies that use social media to engage retail investors are well rewarded for their effort. Research from Victoria University in Melbourne and Stanford University in the US, and the experience of Investor Torque clients is clear.

All 3 show that companies that are too small for broker and press coverage and which use social media to amplify official announcements are able to get their news to more investors.

More investors mean greater liquidity and tighter bid-ask spreads. Social media also adds to the success of capital raisings and enables shareholders to be mobilised in an emergency.

A study of 3,516 ASX releases by Maria Prokofieva, a senior lecturer in accounting and finance at Victoria University, found:

  • Smaller companies, which are generally less visible to investors because they get less coverage by the press and analysts, tend to be more effective in employing Twitter to engage with investors.

 

  • Social media enables companies to establish a direct rapport with their existing and potential investors instead of relying on the business press and analysts to promote their financial information.

 

  • Including hyperlinks in tweets increases retweeting and attracts the attention of more investors.

 

  • Including hashtags makes it easier to find and share information about companies and topics relevant to them.

She concluded that ASX companies can use social media to grab investors’ attention and lead them closer to the decision to invest.

 

For tips, techniques and resources on using investor social media, click on www.investortorque.com