While the US stock market was rocked by the riotous upswell of investor action via the Wall Street Bets and thousands of YOLO traders in 2021, this week saw British investors mount a much quieter challenge to the status quo in the City of London.
But, after a group of retail investors clubbed together to push for governance improvements at the board of a London-listed company, those behind the move hope this direct action could be the spark for other small investors using their collective power to effect change.
Jolted into action, the company, Bidstack Group, has already promised to make improvements and has convened a general meeting where shareholders will vote on whether to remove two directors, as requested.
Depending on how the situation plays out, the coordinator of the action, Nick Hargrave, a former UBS and Rothschild investment banker, says he sees this as a "case study" for how small private investors can use social media to coordinate and use their collective power to push for change.
Hargrave eight other private investors, who collectively hold a 5.25% stake in AIM-listed Bidstack, organised for requisition letters to be written from the retail platforms on which they hold their shares, including Hargreaves Lansdown and Interactive Investor.
Forced to react, Bidstack spoke to some of its major institutional investors and presumably found they largely agreed that improvements could be made. As a result, it pledged to enhance communication with investors, announced plans for a review of the board and advisers, as well as scheduled the meeting as requisitioned.
Messaging app group
Hargrave took on the role of ringleader of this private investor operation after being invited to join a group of "several hundred" investors on the Telegram messaging app.
"It was only recently, after the company published its full year results with a disappointing H1 update and news of a further fund-raise that enough shareholders agreed we could wait no longer to take action," he says.
"Given we are dealing in the public markets, a small number of shareholders started a smaller group, bound by confidentiality, to co-ordinate the requisition where I took the lead on getting documentation reviewed by lawyers and educating some of the broking platforms on what was needed as it isn‘t a request they get every day – given UK company law, the requisition needs to come from the ‘member’ on the register (which are the broker nominee accounts) rather than the beneficial owners."
Hargrave, who runs a subscription-based investment ideas website Moulton Harrox Members (MHM), sees the company's reaction as significant.
"Once the situation has played out," he notes, "I think it will be an interesting case study.
"It is clear already that we have succeeded in bringing about change from a board that otherwise showed little interest in engaging with retail investors despite them being a large majority of the register."
Bidstack, whose shares are down 72% over the past 12 months, was one of the ideas that Hargrave had previously suggested to members on the £500-a-year subscription MHM site.
He says his experience at private equity firm DBAY Advisors, where share buying and shareholder rights were used as part of the process to take companies private, is the basis for his knowledge of the process used with Bidstack.
To effect meaningful change in the corporate world is no small feat, and the jury is still out on whether Hargrave and his collaborators will indeed manage to alter the board's composition and improve the board's communication skills.
Furthermore, as individual investors or groups of shareholders need at least a 5% stake to require the directors of the company to call a general meeting, it will be even more difficult if their sights are levelled any higher up the stock exchange ladder than the £11mln market cap Bidstack.
However, this endeavour could serve as an encouraging case study for other frustrated retail investors in the UK – with Hargrave hinting he would be keen to orchestrate similar actions in the future.