After analysing over 2,000 deals and the registry data of more than 80 companies, we've come up with some revealing insights into typical post-placement activity. We wanted to understand how different investors, namely new versus existing shareholders, behave after a capital raise. The results might surprise you, especially if you've been led to believe that these groups act in starkly different ways.
Expectations vs. reality.
Before our analysis, we ran a poll asking our community whether it's new or existing shareholders who are more likely to sell during the post-placement period. An overwhelming 75% of respondents believed new shareholders were more prone to selling off their positions. This assumption makes sense on the surface—after all, it's easy to think that holding multiple tranches of a stock indicates a certain level of loyalty from existing shareholders.
However, our data tells a different story. While it's true that new shareholders are slightly more likely to sell out completely (35% vs 30%), both groups are almost equally likely to downgrade or reduce their positions. The overall difference? New shareholders will either downgrade or sell out 51% of the time, compared to 46% for existing shareholders. A minor difference, right? It’s far less significant than many might expect, given the prevailing perceptions about investor behaviour.
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The importance of post-placement strategies.
These findings highlight a critical point: post-placement strategies around retention and engagement shouldn't target just one investor demographic. The slight difference in behaviour suggests that all investors, regardless of whether they are new or existing, should be approached with similar strategies to encourage long-term commitment.
Digging deeper into the data.
But let's get real for a second. What happens when companies raise funds from new investors? Typically, these raises are done at a discount to the last traded price to attract investors. As a result, a significant portion of these investors may sell their shares as soon as it's profitable. In fact, our analysis shows that, on average, 44% of shares bought during a placement are sold within the first three months. Yes, nearly half!
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Imagine the implications: you raise 100 million, and then face 44 million in additional selling pressure over the next 90 days. That's not what a company wants after raising funds. This statistic underscores the importance of having strong post-placement retention and engagement tools. It's not just about raising capital; it's about ensuring that your investors see your company as a long-term investment, not just a short-term gain.
The direct-to-investor advantage.
At InvestorHub, we believe that successful engagement goes beyond just numbers. It's about creating a compelling narrative that resonates with your investors, making them feel like they're part of your journey.
When the time comes to raise capital, a company that has scaled its investor engagement can, quite literally, capitalise on its strong shareholder relationships. Consider stories such as ASX:REE or ASX:ATC; both companies were able to raise millions from engaged shareholders with less fees and less dilution.
You can also learn more about direct-to-investor (D2I) marketing at this handy resource.
