Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Stock Transfer Agents - Coping With a Shrinking Universe of Providers

Transfer agents take a lot of heat – from shareholders – and sometimes from their clients too, although, after all, that’s what you really pay them to do. But if you stop to think about it, you’ll realize that they probably wield more tools on your behalf than any other supplier you have.

This business, as most readers also know, has been undergoing a massive consolidation for over ten years now – driven mainly by dramatically falling unit volumes as shareholders continue to migrate to ‘street-name.’ The result; a do-or-die competitive environment.

At this juncture, we are convinced that there is no room in this industry for more than three, or at most, four players…and that one of the five largest Transfer Agents - and maybe two of them - will not be around in 3-5 years.

Let’s take a quick look back: Over just a few years we saw Mellon Bank merge with Bank of New York – to pass up former number-one transfer agent Computershare’s once commanding market share by a country mile. And then, rather amazingly - on the heels of a massive theft of sensitive shareholder data from BNY-Mellon - Computershare bought the business to take a basically insurmountable lead…And then – as so often happens with rapidly consolidating businesses – came a new entrant, Broadridge Financial Solutions, which promised to follow a ‘disruptive’ business model.

Then, not long after, we saw one of the two largest agents in the mid-sized-agent category, Registrar and Transfer Company sell its business to Computershare….under something of a ‘regulatory cloud’ as we later found out. And then…one of the largest of the ‘smaller agents’ – Illinois Stock Transfer, was shut down by the SEC…for using shareholder funds to keep their struggling business afloat. And then, just a few months later, another of the biggest ‘small agents’ was snapped up by AST - which has recently been shopping its business around for a new equity partner, but which still looks like a long-term survivor to us.

This poses quite a dilemma for public companies that might be less than fully satisfied with their current agent - or who, while satisfied with the status quo, are being required to put all of their major supplier relationships out for bids, as part of a corporate-wide mandate.

It poses an equally big puzzle for companies planning to go public - or to spin-off a big unit - where a decision as to which transfer agent to use must be made.

What should you be doing in this environment, if you are a public - or soon-to-be public company? For starters, you might want to read our article and review the stats on Transfer Agent Market Share - The Key to Long-Term Survival. Next, please review our newly revised article on Evaluating and Selecting a Transfer Agent. We’d also suggest that you carefully review our article on Transfer Agent Liabilities- which are much bigger than most people realize - and which could leave your company on the hook for huge losses if your agent makes a big blooper, or otherwise goes belly-up, leaving your shareholder records in disarray, or maybe gone altogether.

If you have Qs, feel free to call us. A subscription to the OPTIMIZER comes with “some free consulting on any shareholder servicing matter that ever crosses your desk.”