Most company executives treat share registers at their face value: a legal requirement to be endured. But forward-thinking businesses are using technology to turn them into a valuable asset, which strengthens customer relationships and creates opportunities for growth.
Changing the record on share registration
For the majority of businesses, share registers aren’t something that warrant much attention, other than making sure they’re kept up to date. They’re filed away on spreadsheets or word documents, and only thought about when a shareholder changes their contact details or a share changes hands.
Any share register technology that exists on the market tends to be complex and geared towards the needs of publicly listed companies, while registrar services are often too expensive for privately-owned businesses — especially start-ups. All in all, share management is not something they take much notice of.
However, some leading-edge companies are changing their approach to share registers, viewing them as a lucrative CRM tool and potential fundraising source. This shift is being driven by a new wave of blockchain technology, designed to digitise and simplify share management, reducing the cost at the same time.
“Most people have heard about blockchain, but they haven’t seen a real product using blockchain technology until now,” says Florian Batliner-Staber, Founder & COO of Own, which recently launched the world’s first decentralised share register.
“A share register is a strong use case for blockchain, because it avoids having to use a registrar with a separate infrastructure or a central securities depository. There’s no need to duplicate or reconcile data, and information can be edited in real time.”
For both public and privately-owned companies, blockchain technology solves many of the pain points associated with share registration. The register is decentralised, meaning that no single user has overall authority — and therefore there cannot be a situation in which people are working on multiple versions of the list.
With a decentralised share register (DSR), shareholder data is always up-to-date, and automatic version control is in place for a full transactional history. At the same time, data cannot be lost, misplaced or tampered with, so situations where IT teams accidentally delete or modify data without the list owner realising become a thing of the past.
Another key benefit is that DSR’s enable businesses to remove middlemen from the share management relationship. There is no need for a registrar, Central Securities Deposit or other party to validate information, because there is no need to reconcile different users to ensure that data is correct. At present, many businesses are having to run their share register through these third parties, which is time-consuming, inefficient and often leads to data errors. Decentralised share registers are a much quicker and more trustworthy way to ensure that businesses and shareholders both have up-to-date information about their investments.
In addition, with a decentralised register, sensitive information is encrypted yet shareholders can access the register to check their personal details are correct. And when a share is sold, shareholder information can be removed without interfering with transaction records.
From list management to shareholder engagement
However, operational advantages pale in comparison to the added value that share registration technology offers companies that want to make their shareholder relationships work harder.
By enabling a tighter, more thorough shareholder record, stored in a central, digital location, companies can communicate with their investors in a more targeted manner — and create new fundraising opportunities in the process.
“If we just offer companies a technical solution for maintaining their shareholder list, they might as well continue using spreadsheets,” Florian admits. “The value comes from the fact that shareholders are engaged with their brand, and they have the accurate information needed to communicate better with them. That’s the killer benefit.”
This approach isn’t new; tech giants like Google and Facebook are happy to give away their software for free, because their revenue comes from the data collected when people use their services. However, few companies are applying this principle to their share register, or using data to understand their investor base in more detail.
“Once you have accurate shareholder information, you can start analysing that data, and segmenting it to produce communications that will help your business grow,” Florian explains. “There are so many angles to explore.”
From gender to geographical location, critical information can be gathered by organisations and used to create targeted nurturing campaigns. Companies may want to incentivise shareholders to become more frequent customers; turn loyal shareholders into brand advocates across social media; use word-of-mouth to secure recommendations; even recruit shareholders to become employees.
Whatever the objective, one thing is common. Shareholders feel like they are engaging with a company that cares about their relationship and are getting better value for money.
Turning companionship into capital
While a well-managed share register is undoubtedly a powerful CRM tool, some companies may struggle to make the connection between better engaged shareholders and greater capital raising opportunities.
Being able to communicate with all shareholders online takes the focus away from burdensome AGMs. It also creates opportunities to make investors of all sizes — even those that own a handful of shares — feel equally valued.
“Some investors may not own much physically, but emotionally they feel part of the company,” urges Florian. “They can become important brand ambassadors, particularly on social media.”
The challenge that has faced businesses until now is that smaller shareholders cost their company money, as most registration technology providers will charge per transaction or the number of shareholders in the register. However, Own has developed its technology in a freemium model — similar to the approach of Google and Facebook — so that its core list-keeping functionalities are free of charge.
“We don’t want to punish companies for having long lists,” Florian assures. “Putting people off having as many shareholders as possible is the wrong approach.”
Instead, Own’s software model offers two capital-raising opportunities for growing companies. Firstly, there is no penalty for bringing on more investors, which means businesses are free to attract new shareholders of all sizes.
Secondly, the blockchain technology on which Own’s decentralised register is built enables companies to tokenise shares, so that investors can own a fraction of a share at an affordable price.
This way, businesses can launch a primary issuance, tokenising shares instead of going through a costly initial public offering (IPO). By offering digital representations of a share, they can attract a new target group of investors that would otherwise have been priced out of the market — and incentivise them in different ways.
For example, rather than rewarding their investment with a dividend of a few pounds or pence, they can offer tangible benefits such as exclusive products and offers, or money-off vouchers. This makes the investor feel valued despite their modest contribution, and encourages people to invest further in a company they truly believe in.
Making share registers a marketing priority
But while blockchain is changing the investment game, Florian urges privately-owned companies to think beyond technology and focus on the added value that nurturing their share register can yield.
“We need to shift our minds away from thinking of share registers as just a list,” he concludes. “They can be a very powerful tool for shareholder engagement if used in the right way.”
Own’s challenge is to educate the market on this opportunity, and ensure that companies recognise blockchain technology as a vehicle for business growth.
To find out how digital share registration can help you to raise more capital, visit Own’s website.
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