Shares in public companies are a “product”, and they exist in a competitive environment with plenty of choices.
London-listed companies must communicate better with their shareholders, keeping them involved and supportive.
Public companies with excellent prospects need to use the awesome power of multimedia to drive retail interest in their shares, making London a more competitive place to float.
When will PLC CEOs realise that a puff piece in the Sunday papers doesn’t drive their share price?
The Digitisation Task Force, led by the former chair of HSBC Sir Douglas Flint, published its interim report to zero fanfare last month, but this low-key initiative is vital in changing the City’s fortunes.
It was established in 2022 to “drive forward the modernisation of the UK’s shareholding framework”.
This involves ditching paper certificates, replacing them with interests held electronically, and introducing obligations on those intermediaries identifying beneficial owners and the exercising of shareholder rights.
It’s also exploring paying dividends electronically rather than by cheque. Heady stuff. It’s hard to understand why these basic steps have taken until 2023 to be considered (not yet legally changed).
The first share certificate was issued in 1606 by the Dutch East India Company — not much, it seems, has changed for UK companies since then.
Except it has.
Company and shareholder engagement has probably deteriorated.
In the Sixties, more than 50% of people in this country owned shares. Today it’s just 12%.
M&S chair Archie Norman recently made the point that they can’t speak directly to 70% of the private shareholders of M&S due to the rise in nominee ownership, and he’s losing a further 4000 a year to this trend.Just over 40% of investors in the Stock Exchange use nominee accounts.
Why does this matter? The London listing scene is currently a desert.
Those companies turning their back on the City look at a number of data points, one of which will be their peers’ values.
Much has been said about the decline of enthusiasm for UK equities. The Treasury and, indeed, shadow Treasury teams are toying with the idea of obligating defined pension schemes to use a percentage of their £1.4 trillion assets for a UK Infrastructure Fund and UK public equities investments.
Obligating asset managers to buy an asset class is a bad idea. If it’s good, you don’t have to.
The arguments around the unpopularity of the UK as a place to list have all revolved around changing the rules to “make it more attractive” to companies to choose London over other centres, such as New York.
When analysing these ideas, too many veer towards loosening investor protections. It’s ill-advised.
How UK-listed companies engage with their shareholders is lamentable.
New legislation needs to ensure companies hold the email addresses of all shareholders as a starting point, so that they can talk directly to them.
As a former investment bank CEO I understand that institutional investment creates solid foundations of ownership, but it’s the retail engagement that’s really needed to drive the share price.
Which companies are utilising the incredible reach and power of the new communications networks to promote their prospects (and share price)?
You can now buy shares on apps; it’s never been easier. Companies need to stop whining about the lack of interest in their equities and build some.
The millions of pounds wasted on the lawful obligation to print annual reports, too long to be readable, could be spent on electronic versions (of varying lengths!) and the rest on promoting the company’s prospects using multimedia methods.
Public companies need to be more fearless in driving demand for their shares. It’s the most sustainable way to make the City the best place to list again.
