Why Issuers In More Than 22 EU Countries Use Shareholder Identification

When the European Commission updated the original Shareholder Rights Directive, it stated that SRD II would “aim to contribute to the long-term sustainability of the EU companies, enhance the efficiency of the chain of intermediaries and to encourage long-term shareholder engagement.”

One of the most significant adjustments to the directive was the ability for issuers to request details of the identities of shareholders from intermediaries who are obligated to reveal the data in electronic form. 

This summary of Euronext Corporate Service’s ebook on the topic explains how to carry out shareholder identification, what benefits it offers and how issuers across 22 EU countries are already taking advantage of this ability. 

What is shareholder identification under SRD II?

Before SRD II, all transactions in securities would flow through the bookkeepers and into central securities depositories (CSDs) in order for settlement to take place. But only the bookkeepers had any idea of the shareholders involved. 

SRD II states that issuers have the right to request this information, with any intermediaries being obligated to hand the information up the line to the issuer without delay upon request. This provides an opportunity for all EU issuers to understand who is investing in them across the entire union and why. 

How do issuers use shareholder identification?

Track position movements

Discover when shareholders enter or exit the company or when they reinforce their position so you can determine whether your outreach is working or not.

Anticipate activism

Issuers can be better aware of the signs that they are being targeted by activists. By spotting trends that generally precede an activist campaign, you can act early to mitigate it early.

Benchmark share capital 

Because the data on shareholdings is public, you can compare your shareholding with your competitors and understand your performance in the context of the industry as it stands. 

Tailor IR outreach

You can segment your shareholder base and reach each audience in the manner you believe they will best engage with. The data you find enriches the information within your CRM. 

Prepare for AGMs and roadshows

Having this data at hand can help the listed company research attendees more thoroughly and implement voting policies that work for its major shareholders.

Test investor sentiment

Knowing who invests in your company allows you to gain insight into investor sentiment towards big proposals such as mergers. This prevents a company from making a bold move that it may instantly regret when shareholders react negatively. 

Improve investor targeting

When you know who invests in your company, you can find the gaps in your shareholding and specifically aim to engage relevant profiles to create a more diverse shareholder base. 

How issuers across Europe benefit from shareholder identification

Research conducted by Euronext Corporate Services and its shareholder identification provider Proxymity collated the number of shareholder disclosure requests (SDRs) in 2021 and 2022.

Amongst the main findings of the study, Proxymity discovered that:

• In 2022, 863 issuers actively engaged in identifying their shareholders. This is an increase of 238 from the 625 who requested share registers in 2021.
• In total, there were more than 2,000 SDRs ordered in 2022, an average of more than two per active issuer.
• The number of SDRs made by small-cap companies almost doubled over the two years, up 87% in 2022 from 2021, but more than 90% still do not make use of SDRs which could give them a competitive advantage.

Shareholder ID trends across the EU

France

France is the most advanced nation in terms of making shareholder identification requests likely due to legacy legislation. 47% of listed companies in France made SDRs in 2022, an increase of 60% from the previous year. 

Germany

Trends for requests in Germany show distinct seasonality, with notable increases in requests in:

• February, ahead of AGM season
• June, around the half-year results
• September, before roadshows take place
• December, when preparing for annual results. 

The Netherlands

The Netherlands sees similar seasonality to Germany, but it is less pronounced. This indicates that Dutch issuers are more likely to request shareholder identification for other reasons during the year than simply the main investor engagement events. 

Belgium 

Belgium’s requests display seasonality, with March, September and December being the busiest months for SDRs. During 2022, 39% of Belgian issuers requested SDRs, with 24% of active issuers requesting at least three during the year. The majority of these firms are part of Euronext’s BEL 20. 

Portugal

In Portugal, requests follow the familiar seasonality trends, rising in March, June, September and December. 100% of Portuguese large-cap issuers requested at least one share register during 2022.