The ‘Instividual’ Investor…We Make Your Markets and We Are More Important than Ever

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  • on February 23rd, 2012

My friend @ETFhack likes to use the word ‘instividual’ when talking about all the people on Stocktwits. It’s not a new term, but it sure feels like it fits.

The ‘bankers’ of the world tell people how to think in the world of finance.

To them, there are two buckets of investors… ‘Retail’ and ‘Institutional’.

When a banker at Merrill Lynch or Morgan Stanley is selling a Company on an IPO or Secondary offering, they make the Company feel all warm and fuzzy about their giant salesforce and the need for the retail investor to hold the stock and cushion the inevitable blows and the volatility that happens over the trading life of a stock. ‘Our bank’ provides that extra distribution and strong hands of the retail investor. The retail investor is KEY (in english…our salesforce will help dampen the blow of the institutions we sell to dumping their stock after 6 months if this is a dud).

After that, the bankers run away until they are chasing down the same Company offering their services for placing a secondary….

I know from calling on hundreds of IR departments that the 80/20 rule applies. The 20 percent of the ‘retail’ shareholder base takes up 80 percent of the department’s time.

The institutions have banks and analysts and their Bloombergs to call on for almost everything, while the retail investor is told to email an IR department or go to an IR page on a corporate website. Yahoo Message Boards sprung up and hundreds of forums to discuss stocks and the management’s during the IPO Boom years of the 1990′s. A great idea, but just an early iteration of a vertical social network.

Finally, with Stocktwits, there is a place that is a better representation of the ‘retail’ bucket… ‘The Instividual’. We have accounts at Schwab, Etrade, Lightspeed, Interactive Brokers and Think or Swim. We really can be a nightmare. We trade stocks, we love to chirp, we have opinions just like the analysts, but we don’t get any of the support. We may have blown up the family nestegg, but not that of the country’s (see Citibank, Merrill, etc…the ‘Institutions’). We wake up every day loving to do what we do. It’s fun. Running the community is hard, but not as hard as people think. We have created tools to curate, have a few ‘house rules’, apply the latest technologies and attract contributors ready to make sharing and discovery happen all in one place, almost on demand. Furthermore, the heirarchy is not just about how many shares you trade and how much money you manage. Finally, and maybe most importantly, our community is ditributed. Sites and portals around the financial web can find us.

Stocktwits is working hard to help companies manage their ‘instividual’ shareholder base — which is always viewed as difficult and costly. We believe a lot of our value is in reducing this cost, and improving the management of this often small vocal yet important group of shareholders.

With so many Companies now contributing to the stream (Verizon, AT&T, SYSCO, LinkedIN, CISCO, Dell, Fedex etc…) it’s time to focus our thinking about how to accelerate the process and help all investors participate, that includes asking questions, sharing ideas and getting the information they need from Companies delivered in new media ways. That is true ‘FAIR DISCLOSURE’.

The ‘rubber stamping’ of Reg FD by a retired ‘Judge Judy’ is just one of the problems that we think needs to go away to cover up the lie of Fair Disclosure that makes it hardest for Companies to use these media.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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