The Shifting Tides of the Modern Market

In the past fifteen years, technology and mobile devices have caused a paradigm shift within markets across the globe. Stakeholders and retail investors have gained enormous power and transparency, but it’s come at the cost of decentralization.


The rapid proliferation of technological innovation and internet connectivity has had a massive impact on Investor Relations in the past decade. The internet has been a commonizing, democratic force for retail investors, who have begun to demand greater transparency and responsiveness from corporate boards via online channels.


Innovative, personalized technology has also begun to replace investor intermediaries, a shift that has both streamlined and, ironically, depersonalized transactions.


At the same time, corporations and IROs have had to respond to these changes, expanding and enhancing their digital outreach to keep pace with the greater societal trend of constant connection. In doing so, they have created a more flexible disclosure environment.


The Game Has Changed For Shareholders

The biggest recent change for shareholders has been one of accessibility. 15 years ago, the only real sources of inside corporate knowledge for the average retail investor were company visits and general meetings held once a year — brief, impersonal, and scant on details.


Niels Lemmers, Director of Legal and Public Affairs at VEB and Managing Director of European Investors, has witnessed a fundamental shift in practice. “Today, the internet and technology have facilitated regular investor engagement, acting as a true liaison. Investors can email an IRO, engage with them on social media, or pick up the phone and say, ‘Hey, I’m a retail investor, and I have a question,” he explained.


“If they don’t respond, investors have the option of taking their story public — on websites, social media, or forums. It’s very grassroots.”


This is a boon to active retail investors, but it can pose a risk to corporations. In 2007, Yahoo! shareholder Eric Jackson voiced his complaints about the state of the company on YouTube and on his personal blog, and 2.6 million shares worth of small investors responded in kind. Yahoo! executive Terry Semel stepped down soon afterwards as a result, according to Forbes.


No corporation is now immune to public debate in the digital realm, and indeed, the Brunswick Group reports that 77% of investors worldwide use digital forums and social media to investigate investment issues.


However, this trend has presented an opportunity for corporations to engage with stakeholders directly and control the narrative. By opening direct digital channels to shareholders, companies have been able to foster a positive public dialogue and improve their image. For, example, digital real estate company Zillow made waves in 2013 when it fielded social media questions during a live earnings call, as CNBC describes.


Technology Has Altered How Retail Investors Engage

For retail investors in general, avenues to investment opportunities have not only become mediated by technology — increasingly, they’re completely digital.


“When you invest in products and instruments, most of the time you have personal intermediaries to the market,” Mr. Lemmers explained. “Those intermediaries have been replaced by computers, allowing you to simply choose ‘I’m offensive or defensive in this market’, whether it’s biotech or oil, and your investment becomes automated.”


Deloitte has dubbed such automated investors “Robo-Advisors,” machines that offer investors low fee structures and integrate big data analytics. While the total market worth of Robo-Advisors is still low, around $20 billion, nearly one fifth of investors already use them, according to BusinessWire.


As the cost-efficiency ratio of using fintech, which can aggregate prices and trends much faster than its human counterparts, continues to be driven down, investors will only come to use digital intermediaries more frequently — especially on convenient, mobile platforms.


Digital Changes for Transparency and Regulations

As for investors, technology and digital channels have also offered corporations a plethora of methods by which they can disclose earnings — that is, social media networks, websites, mobile apps, etc.


In the U.S., according to Harvard, the SEC has ruled that any digital outlet (i.e. Facebook, Twitter, corporate websites, apps) is suitable for the legal disclosure of financial information, so long as a company has, “adequately informed investors, the market, and the media that it will communicate material information in [that] manner.”


This is a far cry from just 10 years ago, when companies could only publish such information via press releases, earnings calls, or official filings.


That said, don’t let your guard down just yet — “Investors need to beware when searching for corporate information on websites, erring on the side of thoroughness,” warned Lemmers. “Though you may not have seen an online corporate message, the company will still have fulfilled its publication requirements.”


Investors Today and Onward

If the rapid pace of technological change in the past 15 years is any indication, investors will be increasingly steeped in multi-channel, personalized, and digital environments. As their ability to make informed investment choices grows, so too will their ability to automate those decisions. Still, the decentralized and complex nature of digital information flow will remain a challenge.


For corporations, the task at hand is to build IR strategies that meet and exceed retail investors’ expectations for digitization and personalization, enabling access to the broadest swath of investors possible. In one sense, this is very new — but in another, it mirrors the way that retail investors courted the attention of corporations just over a decade ago.




(Main image credit: Jonathan Bean/Unsplash)