Our Number-One Moneysaving Tip For This Quarter
Help Your Really Small Shareholders To Cash Out…Now; Before Your A-M Record Date:
Times have changed a lot since we last visited this topic, and it’s way past time for some fresh advice:
Used to be that transfer agents were always peddling “odd- lot buyback/roundup programs”: These days, however, a successful program for issuers tends to cut mighty deep into the TA’s revenue stream…so most TAs have gone to radio silence.
Proxy solicitors were big on selling “turn-key programs” too – many of which, as we’ve pointed out earlier, were great for THEM – but they were not always so good for issuers: Many of these programs wiped out lots of middlin’ investors (‘cause that’s where the money was, for the vendors) who, most times, actually earned their keep as part of the shareholder profile – without putting much of a dent in the teensy tiny folks…who keep on coming back anyway.
But these days, a huge number of the companies whose records we look at have hundreds – and sometimes many thousands of shareholders with a truly immaterial number of shares…with no prospect at all of them ever acquiring a “material” position in your stock.
The vast majority of the really small investors are there by accident: Typically, they sold a “round lot” way back when – leaving behind a few odd stock split or stock dividend shares, simply because they’d mislaid them, or couldn’t lay hands on them on the day they wanted to sell. Another, very common cause: they sold shares from their DRP or DSPP just after the record date for a dividend…inadvertently creating a really tiny fractional-share position. Yes…occasionally – and your editor has been guilty of this too – some very small shareholders intentionally left a small balance in the Plan as their “readmission ticket” – thinking (wrongly, as we can see if we take a careful look) that they’d buy again…someday.
These tiny hangers-on cost you a ton of money – without producing any material benefits at all: More than half of them tend to be registered holders, so you’re paying Transfer Agency fees that effectively buy you zilch. Adding insult to injury, most of these cling-ons – and most of the really small street-name holders too – who generate handling fees of their own – cling on to paper deliveries: So there goes more money out the window for paper, postage, enclosing, mailing and processing fees – which also, typically, produce zilch for your company. Get rid of them, we say, before your Annual Meeting record date rolls around, and use the money for something useful!