We recently published a paper, Share ownership: For the many, not the few, based on a statistical survey of share ownership, produced jointly with Argus Vickers, the share analysis service. The Office for National Statistics (ONS) has now issued its equivalent survey. This paper compares its results with ours. Although there are, inevitably, differences in the detail, the two surveys reach the same conclusions.
The two key themes from the surveys are that: i) investors from the Rest of the World (RoW) dominate the main market; and ii) individual investors are becoming more important. Indeed, the ONS work suggests that retail is far more important than even we have given it credit for.
In the post-Woodford (PW) environment (maybe we should divide time into two periods, denoted as BW, Before Woodford, and PW?), liquidity has become critical to professional investors. Companies with low liquidity risk are being forgotten about – they need to engage with the widest investor audience.
The two surveys identify the rise in the percentage of shares held by individuals, and how significant they are outside the FTSE 100 in particular. For example, according to the ONS, they own 20% of the rest of the Main Market – but they are more important to liquidity than even these percentages suggest.
This paper contends that, for most quoted companies, on most days, small trades set the share price. We have consistently shown that 82.9% of AIM-quoted companies have an average trade size of below £10,000. One might think the Main Market would be different; it is, but not by much. A sample test shows that the average trade size on the Main Market is below £10,000 for 75.1% of companies. Of course, the identity of the parties behind a trade is confidential, but it would not be a wild assertion to suggest that, the smaller the figure for the average, the more likely it is that the party is retail.
Focusing only on institutions is no longer going to cut it. Ignoring retail is not only unfair on these investors, but it also neglects a key generator of liquidity. Such a path may prove ultimately fatal for the public life of a company. This paper outlines a number of routes to improve investor engagement, diversify share registers and grow liquidity.