3 learnings from 30 meetings in the UK
Last weekend, I returned from a quick 7-day trip to the UK. I didn’t manage to get to the cricket but thankfully I was fortunate enough to still pay the associated premiums for flights and accommodation given the Ashes was on. I guess that’s kind of a win?
Three of us made the trek over to the UK and after reaching out to companies, regulators, advisors and more we lined up 30 meetings across 5 days. Our goal was to discover::
What’s different about the UK verses here.
What learnings can we take back from the UK for Australia.
Should we expand to the UK?
I’ll keep you guessing on #3 (get excited) but let's focus on the first two points. What’s different, and what can we learn?
Let’s start with the differences.
- Collaboration between public companies
The UK has an interesting NFP membership body called the QCA or Quoted Companies Alliance. It represents the small and mid-sized companies outside the FTSE 250 (similar to our non-ASX 200) with 300 listed members.
Seeing the members and organisation combine resources to drive changes in the market is very encouraging to see, and that level of collaboration between public companies is something we should strive for here.
- The frustration of nominee accounts
These are somewhat annoying here but are extremely annoying in the UK and it’s crazy that 95% of the shares in the UK are held on nominee accounts.
The only non-nominee accounts are (some) insiders and investors on old-school physical share certificates.
That’s right. No emails. No entity details. Yuck...
- The modesty of retail investors
It was a surprise to us that retail investors in the UK don’t like to talk about finance with strangers online.
Therefore places like our infamous HotCopper’s UK equivalents haven’t grown to the same significance and therefore don’t have the same impact on retail behaviour. It looks like driving direct engagement is the key for public companies in the UK.
Therefore places like our infamous HotCopper or its equivalents don’t exist at all in the UK, and it looks like driving direct engagement is the key for public companies. - The prioritisation of ESG
The UK is likely a decade ahead of us in regards to ESG with many funds requiring ESG justification to invest. Although we’ve started to tag along the movement, it’s still an early effort for most companies in Australia.
In the UK, it’s the real deal. ESG has more investors, whether it’s institutions with a mandate, or retail investors with a conscious. It presents an opportunity for Australian companies to lean in to open up investment opportunities both domestically and abroad.
And now the similarities.
- We both have a long tail
The UK has the LSE and AIM, the primary market for larger caps and the secondary sub-market for junior companies.
And although we’ve only got one major exchange, we’re similar with the super long tail of public companies vying for retail investor attention.
- The importance of retail
Although retail investors aren't as big in terms of percentage held, they look pretty similar to Australia in terms of relative volume traded.
However, the popularity of the nominee structure and the complete lack of shareholder data means that public companies just don’t know for sure.
- Funds behave the same
In Australia and the UK, funds are behaving the same and retreating up the market cap ladder to safety.
What was once a $50m entry point has now become $250m as a minimum, meaning that if you’re in the former category, your messaging should be targeting retail investors.
- Companies know the solution
Just like Australia, public companies in the UK know that they need to drive more retail investment, and that’s only been exacerbated by the movement of funds to higher market cap safety.
The three key learnings
Data is a blessing.
Public companies in the UK don’t even know who their shareholder are. Given that 90% of the UK register is accounted for by nominees, we’ve learned that knowing who you shareholders are is a uniquely Australian asset.
Imagine if CommSec, NabTrade, ANZ, Canaccord or anyone else was a nominee, and you couldn’t see a single person. Where instead of having 30% of your shareholder emails, you had 0%.
We have the data here in Australia and it’s a competitive advantage. Not utilising and maximising it is a crime.
Funds are moving.
It’s the same in the UK as it is here. Funds are flying to security by moving out of the lower half of the market.
They might be back in a couple of years but for now, it’s primarily going to be retail who drive the market for the sub-$250m (or £100m) market cap companies.
If that’s you, it’s time to shift your messaging to face retail and treat institutions as an outlier because it might be a while until funds come back.
Lean into ESG
There isn’t anyone in the world with an ‘anti-ESG’ mandate but there are plenty of funds who are keen to understand ESG credentials and investors with an ESG conscience.
Leaning into ESG is both better for the world, and your investor demand.