Retail investors are the future of the New Zealand stock exchangeRetail investors are the future of the New Zealand stock exchange

First published in The Sunday Star Times, 22 September 2024

“The best time to deploy capital is when things are going down.” So said investment guru Warren Buffet about how to make money in markets that are dipping. It might work well as investment advice, but it’s equally important advice for companies looking to invest in engaging their shareholders. When times are tougher like they are now, companies should be putting their effort into the investors that will stick around for the long game.

Retail investors have traditionally been tarred with the brush of being fickle and dividend driven, like a school of minnows moving to the latest, shiniest thing. But over the last seven years of Sharesies, we have proven this wrong. The new wave of retail investors is here and New Zealand companies need to be paying closer attention. 

Across 600,000 investors in New Zealand—12% of the population—we have never had a month where more shares have been sold than bought on the Sharesies platform. Even during the recent market ups and downs in August 2024, there were four times the number of investors buying than selling across all markets and 4.2 times the number of customers buying than selling on the New Zealand stock exchange. Over time, they have stayed the course and added liquidity, diversity, and resilience to New Zealand companies. 

When the stock exchange is subdued, as is currently the case, companies should be deliberate about engaging with these investors. And, a piece of advice here, don’t do it just by sending on the annual report or holding a hybrid annual general meeting (AGM). Expectations for engagement have changed rapidly and innovation is imperative for future-focused companies. 

We are now operating in a context where on-demand information is the norm. Around 78% of New Zealanders use social media and companies have responded with the full range of sophisticated marketing tools to directly engage with customers through these channels. Shareholders are an equally important stakeholder who are often also customers, and yet by and large the investor relations community isn’t taking up the opportunity to engage them digitally. 

It might seem complicated to meaningfully engage with such a diverse base, but with the right technology, it’s possible to do this effectively at scale. And the opportunities for companies to gain real-time insights into trading statistics and shareholder motivation are immense. Feedback then becomes less about a finger to the wind based on expensive reports and more about a direct channel to what people feel, need, and want. 

Infratil is a good example of this. They have put huge effort over years into engaging their retail investors on multiple digital channels, including social media, their website, podcasts, and YouTube. And they have reaped the rewards. This year, they went out and raised over one billion dollars, even when commentators said the market was 'closed', by tapping into their retail base.

Advisors and investor relations managers can’t control the economic or global conditions that will impact the next earnings season, but they can control how much they leverage the power of the retail investor. With more focus on the direct communications channels where real insights happen and taking retail investors on the journey, we have a real shot at strengthening our local companies with the loyal, long term support of a growing set of shareholders who are in it for the long game.