Shareholders have become savvier in the last three decades. They want to know more about the companies they invest in. Investors no longer choose a company simply because a stockbroker or a friend told them to invest in that particular company.
Shareholders want to read information, learn about a company, know their objectives, and even understand who is running the company and why.
Table of Contents
Why Are Investors So Proactive?
Sure, at one time in history, a banker or a stockbroker would say invest in this company, and the investor did it. He trusted implicitly in the profession and walked out of the institution’s office thinking his money was safe.
Things began to change in the 1920s when the stock market crashed. Other critical situations like the Exxon Valdez disaster of 1989 and the market crash of 2008 have also influenced the way investors connect with the companies they invest in. Today, investors are not so naive and they don’t trust a company based on a simple handshake.
Now, investors want to know that the companies they invest in have a rock-solid foundation and ethically conduct business dealings.
Investors Are Savvier
Today, investors are more intelligent. They have huge amounts of information at their fingertips and use the internet the investigate and learn every aspect of the company they select. So ultimately, the purpose of doing all of this research is to minimize their investment risks and improve their rewards.
Where Do Investors Look for Company Information?
They can turn to the company’s quarterly reports and the news to find relevant information on a company. But new studies show that investors are increasingly making decisions based on their digital holdings, the information they find on social media, and information they find on corporate executives for the company.
The Use of Digital Sources
Studies now show that 98% of all investors use digital sources to research the companies where they invest. In addition, more than 80% of investors make a purchasing decision based on the information they learn online.
Most investors use search engines, news sites, and blogs as their go-to digital source for investing. However, podcasts and social media sites are also becoming of significant value to this type of investor.
Evan Spiegel net worth did not become so large simply because teenagers want to chat. It is because business people, investors, and the like use digital outlets to investigate and get the information they need.
Investigation of Top Executives
One of the most surprising changes we’ve seen in investors getting their information is the extensive research they do on top executives. People now read about CEOs, CFOs, and boards of directors. They want to learn of any additions or changes before they decide to invest their earnings.
People now take the time to see what CEOs are saying, study interviews and articles, and even learn about a director’s background. They use sites like LinkedIn, Google Searches, and even Social Media platforms like Twitter and Facebook.
This new leap into CEO and executive director background research suggest that companies will need to pay close attention to who they choose to lead the company, and executives with weak digital profiles and poor content strategy will affect the way investors purchase stock in the company. So creating effective digital executive profiles on search engines will be an essential component for companies who wish to have strong shareholder relationships.
Young Investors Trust Social Media
Most young investors use social media to do research but also to make investment decisions. For example, about 40% of all stockholders between the ages of 20 and 35 use social media platforms like Twitter and Whatsapp to make an investment decision.
Investors in this age category trust in what they learn on these social media sites, maybe not as much as they do from a financial media site, but they do stand higher than traditional publishers, articles, and blogs. Trust in YouTube, Reddit, Twitter, and Whatsapp may not be as high as the financial platforms, but they are comparable to Buzzfeed and WebFX.
The Measurable Link
The consensus is that there is a measurable link between online communications and a company’s share price. Online communication does have a significant impact on the way investors invest.
There are three takeaways here for company executives. First, make sure that senior executives use digital and social platforms to communicate pertinent information about themselves and the company they work for. Second, use digital and social media to engage with investors. The easiest and most successful way to do this is through LinkedIn. Third, expand in other digital areas such as podcasts to connect and improve investor relations.