By Tom Uhlhorn, Head of Growth, InvestorHub | Monday, 18 November 2024

For the past five years, existing shareholders have been the primary source of buying pressure for public companies – and their influence has only strengthened over time. Recent data from a comprehensive analysis of over 1.2 million shareholders highlights a fundamental shift in the dynamics of shareholder engagement. Across both bullish and bearish markets, existing shareholders consistently account for a growing majority of buying volume, while the impact of new shareholders has steadily declined.

This trend suggests a need for public companies to reconsider their investor relations (IR) strategy. Traditionally, companies invest heavily in attracting new shareholders, but the data shows that their existing investors are the ones driving market stability and growth. To better support long-term performance, companies may need to shift focus from acquisition-heavy IR towards deeper engagement with existing shareholders.

Key findings

1. Existing shareholders drive the bulk of buying pressure: Median data shows that existing shareholders have accounted for 47% of buying volume over recent years, rising to over 50% in the last two years. In September 2024, this figure reached 56%, underscoring the increasing role of current investors in providing market stability.
2. New shareholders play a diminishing role: New shareholders, once a more significant driver of buying activity, have been responsible for a smaller share of buying pressure each year. Recently, new shareholders have contributed just 25-30% of buying volume, down from peaks around 34% in 2021. This shift should encourage companies to reconsider whether they are over-investing in new shareholder acquisition.
3. Stability across market conditions: These trends hold true across varied market conditions, indicating a lasting change rather than a temporary effect. In volatile times, existing shareholders appear even more vital in supporting share prices when external demand slows.

Rethinking IR strategy

For many companies, a typical IR strategy leans heavily on acquisition tactics, relying on promotional channels to reach new investors. However, the data suggests it may be more effective to reallocate resources towards strengthening relationships with existing shareholders. Here are some practical recommendations:

1. Shift resources to support existing shareholder engagement: Rather than focusing primarily on acquisition, companies could channel IR resources towards nurturing relationships with existing shareholders. Direct engagement and personalised updates could foster loyalty, encouraging shareholders to increase their holdings over time.
2. Reconsider the mix of promotional channels: Traditional IR often targets new shareholders through paid “top of funnel” channels. Given the data trends, companies might see more value in channels that speak directly to existing shareholders, such as targeted email marketing, webinars, and an interactive investor hub. Strengthening existing relationships could reduce volatility and increase resilience.
3. Develop targeted campaigns for past shareholders: Past shareholders also play a meaningful role in driving buying volume, contributing 20-30% of recent buying activity. Companies can look to re-engage this group through direct campaigns that are personalised to previous shareholders.
4. Increase transparency and involvement: By offering regular updates on company performance, milestones, and market positioning, companies can deepen shareholder understanding and confidence. Transparent, regular communication can enhance loyalty, encourage shareholders to remain invested for the long term, and drive conviction with the group that is responsible for the highest amount of buy pressure.

Data highlights

The data below illustrates the shift towards existing shareholders as the primary source of buying pressure:

• 2019-2020: Existing shareholders accounted for around 40-42% of buying activity, while new shareholders represented approximately 30-32%.
• 2021-2022: A marked shift occurred, with existing shareholders rising to consistently comprise over 50% of buying volume, while new shareholder contributions declined.
• 2023-2024: Recent data reinforces the trend, with existing shareholders making up 50-56% of buying activity. New shareholders fell to around 21-26%, with past shareholders holding steady.

Evolving IR: From acquisition to cultivation

These findings indicate a pressing need for public companies to re-evaluate IR strategies and shift towards a model of “cultivating” rather than “hunting” investors. Instead of investing heavily in acquiring new shareholders, a balanced approach focused on deepening existing relationships may prove more effective in fostering stability and growth.

To make the most of this trend, companies should consider:

• Regularly analysing shareholder data to adapt IR efforts to those segments with the most significant impact.
• Enhanced communications through direct engagement methods, including newsletters, webinars, and in-person events.
• Incentives or loyalty programmes to reward long-term shareholders, encouraging them to maintain or grow their positions.

By focusing IR resources on existing shareholders, companies can create a more resilient investor base, ultimately achieving greater stability and a stronger market position. This data-driven approach represents a sustainable way forward in a changing investment landscape.

Originally published on InvestorHub.