Another Look at Transfer Agent Market Share; The Real Decider, We Say, of Transfer Agent Success… and Survival
Recently, a reader sent us a link to a web-posting from a firm called Auto Analytics, which has been tracking Transfer Agent market share since 2012, based on the number of companies that are active SEC registrants. This way of measuring market share produces very different results from our own method, which is based on the number of shareholder accounts maintained, which we have been tracking and reporting on for over 20 years now.
We like the Auto Analytics info – because it is based on firm and easily verifiable numbers – whereas, as we’ve noted consistently, the number of ‘open accounts’ that T-As report often include shareholders of bankrupt companies, shareholder accounts that are technically closed but still maintained, sometimes double-count registered and DRP/DSPP accounts, and often add more than a little marketing “windage” to the numbers besides.
On the other hand, our own longstanding method provides a much better estimate of the relative gross revenues of each agent, since we have always adjusted the T-A numbers in light of our own long-term scorekeeping measures, and because the number of shareholder accounts maintained is one of the major revenue drivers, although not, we’d remind again, the only factor….And that factor, of course, is the best indicator by far of a T-A’s size, strength and staying power. As such, it has increasingly become an important factor in a T-A’s ability to attract new clients.
So here are the market share percentages, based first on the number of SEC registered clients as of 9/30/2015, followed by our own shareholder-of-record percentages, also as of 9/30/2015:
Both sets of numbers seem consistent to us with what we know about the industry as a whole – except, that is, for the high percentage of transfer agency relationships attributed to “all others” by the Auto Analytics survey: If we assume that the number of SEC-registered issues was somewhere between 4,500 and 5,000 on 9/30/15, that would mean there are over 1300 other transfer agents out there – which is a much higher number than the mere 393 the SEC cited in June as being “registered transfer agents” - or that we ourselves can identify these days. (We think the discrepancy may be because some companies may still list themselves as the transfer agent in order to be the primary point of contact for shareholders – and may still retain some of the common transfer agency functions – but which have largely outsourced most functions to - and spend most of their T-A budget on - full-time T-As.)
There’s also another interesting and related story making the rounds - that potential new SEC regs will drive business to the “top-five agents.” Good luck with that, we have been saying; first because we’re betting on yet another failed rulemaking attempt by the SEC. but largely because if our own numbers are right – as we are certain they are – the revenue effect – even if every one of the ‘all other’ players were to lose ALL of their business - will be a basically immaterial number: Less than 4% of total industry revenues, we feel sure. Plus, most of the larger-dollar accounts would go to the top two to four players, which would not move the market-share needle much at all.
MORE CHANGE TO COME, FOR SURE: Since our own 2015 study there have been at least six big T-A changes by six really large and shareholder-rich companies that will likely cause some noticeable shifts in the market-share percentages of shareholder accounts maintained…And our sources say there are ‘more to come.’ There’s also the potential sale of AST out there, which will likely re-shuffle the competitive deck come what may. Accordingly, we will plan to revisit this in the first-quarter 2017 issue, so do stay tuned…And OUCH! There’s another wild-card in the deck (see the following story) in that many of the “registered shareholder accounts” that reside on T-A records, and add, very considerably we think, to the revenues of some T-As, hold literally immaterial positions, and really need to be cleaned up and closed out.