AGMs – Top 5 Reasons Why Retail Investors Need to Attend!
The Companies Act 2006 provides an obligation on every listed (public) company to hold an Annual General Meeting (AGM) each year within the period of six months beginning with the date following its accounting reference date.
These AGMs are hence a perfect opportunity for investors to meet the Board of Directors, get an update on the Company and vote on any resolutions (or other business), yet my experience is that very few retail investors attend AGMs in the small cap space.
So why should investors attend what is seen by many to be a rather dull and mundane use of their time? Here are my top 5 reasons!
No 1 – Get to know the Management Team / Board of Directors. Despite numerous hours of research, analysis, due diligence, scuttlebutt and other such activities used by investors in stock selection, at the end of the day the Board of Directors are the ultimate stewards of our hard-earned invested capital.
Why, therefore, do many investors not get to know the management team looking after their money? Often, I hear that investors think it’s difficult to judge character and/or it’s easy it be schmoozed by a charismatic CEO or Chairman. I don’t disagree with this but here are some considerations:
- Can you relate to one of more of the Board members, i.e. is there some common ground such as have you worked in the sector before or do you share any similar interests?
- Do they seem trustworthy?
- Is just the main Board in attendance or are other managers of the business present? If they are present (often this is the case at the Haynes Group AGM for example) you can get the opportunity to talk to them about their own businesses.
- Who appears to be the dominant executive? Is the Chairman overbearing? Do the NEDs look engaged or half asleep?
No 2 – Check out the Company HQ / premises. Not all AGMs are held at Company HQ but quite a few are. Do the offices look way too swanky with a priceless piece of modern art in reception and a string of Bentleys in the car park? If so, shareholders’ money may be funding the lifestyle of the Directors rather than investors’ interests.
If the investee company is a manufacturing firm does it look clean, well-kept and organised with due regard to health and safety, etc? Perhaps you might be able to get a factory tour after the AGM or at another agreeable date?
Do the offices/premises look tired and poorly maintained and in need of potential future costly investment? Freehold or leasehold? Do the offices look busy with motivated employees?
There is a lot to be gleaned from such seemingly secondary factors.
No 3 – Meet other investors / attendees. Despite typically being poorly attended, I have lost count of the number of other investors I have met at AGMs and gone on to form long-standing friendships with them. I first met Professor Glen Arnold at a Fletcher King AGM. I met well-known and respected investor (and voracious Twitter user) @rhomboid1MF at a Haynes Group AGM. The list goes on.
Only this week I attended the Christie Group (CTG) AGM and met another well-informed and enthusiastic private investor who isn’t afraid to ask tough questions of management and has private equity experience as well as being MD of his own consultancy firm. Another contact in my black book!
It also gives you a chance to see if any institutional investors are present (sadly often not) and if not, to ask the Board why they are not present and to perhaps contact the institution and let them know the points raised in the AGM.
Lastly, is the Auditor or Broker / NOMAD present? Both should be in my opinion but often you may just have one of them. Again, further useful contacts and a chance to talk to them afterwards.
No 4 – Ask questions. Not only is the AGM an ideal forum to raise any questions (with the whole Board present including NEDs) but equally it’s a great opportunity to hear the questions raised by other investors. Often, they may raise something you hadn’t thought of or something you may feel uncomfortable raising yourself such as issues concerning excessive Board remuneration or nil-cost options/LTIPs.
It’s not uncommon for me to be the only retail investor at an AGM (or perhaps I am one of two) and hence you have the whole Board at your disposal. Ask about strategy, business streams that are doing well (or less well) or about competitors. Another line of questioning may concern issues that the NEDs have challenged the executive team on in the past.
It’s an open forum and I’ve found that if you are polite and seem well-informed you can pick up lots of useful information.
No 5 – Show the Board that retail investors are intelligent partial owners of the business. Whilst the cynical will say that the Board will just pay lip service to retail investors, my experience is that this isn’t always the case.
If, as noted under 4) above, you have done your homework and are enthusiastic about the business despite perhaps some concerns you may have raised in the AGM, the Board will hopefully engage.
Find some rapport with the CEO, the FD, Chairman or one of the NEDs. Showing that you are interested in the business and not just there for a free cup of coffee pays dividends with respect to ongoing depth of communication with the Board or individual executives.
If they know you are likely to come back next year and ask more tricky questions they might act on them or if you asked for a short presentation at next year’s AGM hopefully they will oblige – if you don’t ask you don’t get! Show them that your voice matters.
Finally, attending the AGM is a chance to get out of the house/office and get some exercise, meet some new people, visit a town you’ve perhaps never been to before and of course you might get a nice sandwich or buffet lunch thrown in if you are lucky!
My next AGM is for RA International (RAI) which is scheduled at the shareholder friendly time of 2pm on Monday 24th June at Dentons, 1 Fleet Place, London, EC4M 7WS.
I hope to see some of you there!
At the time of publication, the author holds a long position in some or all of the companies mentioned.