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Stock market volatility: Market intelligence is your best defense

Monday, May 18, 2020

Effective market intelligence can be a game changer in navigating the current climate of market volatility.

The extreme swings in the stock market – due in part to COVID-19 – have led to a huge surge in the buying and selling of public company stock. The wildly fluctuating market has companies asking: who are my shareholders? Are they mutual funds that are likely to hold their position, or perhaps short-term investors just waiting for a pop in the stock price to sell?

There may be activists among your shareholders who are rapidly increasing their position by taking advantage of steep price declines, waiting to potentially gain influence on your board’s decision-making, or possibly seeking control of your company.

Companies should always have the best possible information about their shareholders – not only during crises – to engage with them on an on-going basis during the year.

Shareholder outreach helps determine if there are any concerns that should be discussed with the board. The alternative is waiting until the annual shareholder meeting, then finding out through poor vote results that some shareholders had issues that possibly could have been addressed.

Good information is hard to find

There is publicly available information on institutional investment managers’ holdings – those that exercise investment discretion over at least $100 million of equity securities. This information is required to be filed within 45 days after the end of each quarter, through a 13F position filing.

The problem with relying on 13F information is that it’s only updated four times per year. Given recent market upheavals, it’s possible that significant changes in holders and positions have occurred since the most recent filing was made.

Use market intelligence to determine your current shareholder profile

Effective proxy services can help your company determine more current information about which holders are possibly buying and selling, or potentially amassing large positions.

Market intelligence, provided by experts in the area of investor identification, can also determine which holders did not support your board’s vote recommendations on proposals during your last annual shareholder meeting.

Strategically, this information is instrumental for management and your board for shareholder outreach purposes, for your next annual shareholder meeting and year-round shareholder engagement. It can also help you identify new holders who could potentially be problematic for your long-term shareholders.

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