A Unique Approach to Targeting Prospective Shareholders

Posted by | October 3, 2012

This morning, I was at The New York Stock Exchange, where I participated on a panel at IR Magazine’s Think Tank – East Coast 2012, entitled “What’s your ideal shareholder base and how do you get there?.” Fellow panelists included:

During the session, we touched upon the following topics:

  • Calculating the right mix—Institutional vs. Retail; Geography and style.
  • Segmenting and building (or shrinking) your retail investor base.
  • Honing institutional targeting strategies.
  • New definitions of ownership across asset classes including ETFs.

On the heels of this morning’s panel, and as a follow up to my post last week which addressed the biggest challenge for small-cap and micro-cap companies being the lack of liquidity, I thought the timing was optimal to highlight Safeguard’s own unique approach to targeting prospective shareholders.

Targeting prospective shareholders has been a crucial component of our investor relations program since I joined Safeguard in 2006. Traditionally, IROs leverage Form 13F filings, which are reports filed by institutional investment managers with more than $100 million of capital under management—such as T. Rowe Price, Fidelity, Putnam, and Capital Research. These filings disclose the stocks these institutions hold in their portfolio. Because a Form 13F is filed with the SEC, all the data is public and therefore accessible by other small- and micro-cap companies.

To match the unique characteristics of Safeguard’s business model, we have employed a distinctive strategy that transcends Form 13F filings. This is not to say we don’t look at 13F Filings, it’s just that we need to diversify our strategy to maximize our coverage. Here’s how we do that:

  1. Target Non-13F Filing Institutions—There are a lot of institutional money managers that manage less than $100 million. If, for example, they manage $95 million and typically hold 20 different stocks, for a company like Safeguard, or any small- or micro-cap company, it’s worth our time for a potential $5+ million investment.
  2. Target Family Offices—13F Filings don’t pertain to family offices. You’d be shocked by how many individuals out there are managing $100Ms of personal wealth through family offices. This information is not publically disclosed. You can’t access a centralized database to find out who these individuals are.
  3. Target Retail Shareholders and Accredited Investors—Effectively targeting retail shareholders and accredited investors is critical. Adding diversification to your investor base is important so you’re not 100% weighted in institutional money.

The results since 2006?

  1. Shareholder Base—Safeguard has transitioned its shareholder base from largely retail to primarily institutional. Today, nearly three-quarters of our shareholder base qualifies as professional money managers or institutional money.
  2. Stock Price—SFE stock price hit a 10-year high.
  3. Average Daily Dollar Trading Volume—This has increased 6x.
  4. Analyst Coverage—The number of covering analysts increased from one to six.
  5. Performance—SFE has significantly outperformed its peer group and major indices, such as the Russell 2000 and Dow Jones, since Safeguard’s current management team came in.

While our success is undoubtedly the result of a combination of factors, I strongly believe that our targeting program is the fulcrum that has most moved the needle.

Next up in this IRO series? How to target the right investor conferences

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