Soldiers rally retail investors for proxy votes • TechCrunch

Retail investors have stepped in. The stock market has been rising exponentially in the past two years. Much ink has already been spilled analyzing the competition between fintech companies like Robinhood and to capture these new customers. But there’s another, less obvious implication of this trend: These new investors also have the power to promote and vote on shareholder proposals that can shape the direction of publicly traded companies.

It’s a classic David-and-Goliath battle as retail investors struggle against behemoth fund managers who try to hold majority stakes in large public companies because they don’t have the opportunity to organize around their interests. with indexes.

Army, a New York-based startup, hopes the balance of power can shift.

Soldier founders Seb Jarkin, Felix Tabari, Zen Yue Image Credits: Army

The company recently announced a $4.3 million seed round led by Northzone and Blocktower Capital for what it calls a “co-ed platform for everyday investors.” The raise brings the total funding up to $6.1 million ahead of a private beta launch scheduled for later this month, co-founder and CEO Felix Tabari told TechCrunch in an interview.

Tabari started his career as a sales person at Bloomberg, where he covered activist hedge fund clients. That experience opened his eyes to how shareholder advocacy can make a difference at large companies, he said.

He first thought of bringing those strategies to retail investors through a new technology platform in 2021 years after small activist Engine No. 1 rallied some of ExxonMobil’s biggest shareholders to fill two of the company’s board seats with more active directors. Climate disasters.

“Even though they have a small ownership interest in that company, they’ve been able to create a really interesting combination to push the company in a sustainable direction for environmental and economic reasons,” Tabari said. “Inspired by seeing what’s possible institutionally, and inspired by what’s happened in Gamestop’s history, what do we do to combine these?”

ExxonMobil’s campaign was a watershed moment for socially conscious activist investors. The number of ESG (environmental, social and governance) proposals submitted by shareholders at S&P 500 and Russell 3000 companies increased this year.

It is very unusual today for retail investors to vote on resolutions. Tabari and his co-founders, Seb Jarquin and Zhen Yue, along with their 15 employees, are betting that building a strong investor community will lead to a stronger flow of information and thus encourage greater participation from retail investors.

Army’s platform wants to capitalize on this trend by providing a home for retail investors to meet, but their shares are still confirmed on the platform, he said. Once users link their brokerage accounts to the Troup app and are verified, they can connect with a “community of influential shareholders” to collectively vote on polls and campaigns that can eventually be translated into formal shareholder proposals.

“If you look at the landscape today, there aren’t many practical ways to leverage your finances, your personal wealth, your portfolio, your 401k, frankly, your values ​​in a productive, impactful, measurable way. [Shareholder voting]I think it’s a real lever to get companies to the best and highest level possible,” said Tabari.

While the technique is still in its infancy, Tabari said Troup’s plan is to sell the platform to professional activist investors and monetize it through B2B revenue.

“Professional activist investors are becoming more active, but are taking smaller and smaller stakes in the companies they target, which means they need to build broad support from more people,” he said.

Tabari explained that there are well-known firms such as ISS and Glass Lewis that provide proxy voting advice to institutions, but have not historically focused on retail investors. Publicly traded fintech Broadridge is another player with a consumer-facing proxy voice, but in Tabari’s view, the company is constrained by very specific rules that limit its ability to encourage shareholders to vote properly. As a young startup, Troup may have more latitude to experiment with different strategies to get retail investors on board.

Ultimately, retail investors can make the difference in important proxy votes, says Tabari, which is why Troup is focused on bringing them into the conversation.

“Most shareholder activity takes place six to nine months before the annual shareholder meeting, and is done in small, incremental coalition-building. What we are trying to do is to carefully build the retail part of that combination, especially by participating only at the end, to create a difference of 5-6% in volume conversion,” said Tabari.

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