Individual shareholders, many of them with more time on their hands during the pandemic, earlier this year banded together to buy stocks, including those of videogame retailer GameStop Corp. and AMC Entertainment Holdings Inc., the movie-theater chain.
Fueled in part by the growing popularity of online brokerage firms, the market frenzy has forced finance executives and investor-relations professionals to take a closer look at their shareholder base and find new ways to connect with investors.
Individual shareholders own about a third of Lemonade’s stock, up from about 10% after the company’s initial public offering last July, Chief Financial Officer Tim Bixby said. Institutional investors and insiders each hold about a third of the company’s shares, which have lost about 20% of their value since the beginning of the year. It closed at $90.40 on Friday, down about 2% from Thursday.
Lemonade has made it a priority in recent months to communicate more with nonprofessional investors about its business model and plans, Mr. Bixby said. The idea is to reach young or novice investors where they spend their time—for example on YouTube or investment apps—and speak about its strategy and performance in simple terms, he said.
“While we can’t directly affect our stock price, we can expand and widen the communication net to bring in a broader, more diverse range of investor opinions and strategies,” Mr. Bixby said.
Mr. Bixby recently sat down for a two-hour interview on a YouTube channel operated by Dave Lee, who describes his outlet as a “stream of consciousness” about investing. The channel, which has about 140,000 subscribers, provides commentary on electric car maker Tesla Inc. and digital currencies. Lemonade chose the format because the length of the interview allowed the company to tell a more nuanced story, Mr. Bixby said. Mr. Lee didn’t respond to requests for comment. It couldn’t be determined whether he owns Lemonade shares.
Lemonade’s Chief Operating Officer Shai Wininger last week answered questions from investors during a live town hall on Public.com, a trading app which allows users to buy fractional shares of stocks. Lemonade said it is also evaluating other social media channels, such as audio-discussion app Clubhouse, which is being used by other companies to connect with current and prospective shareholders.
Lemonade in February began crowdsourcing questions from individual investors ahead of its March 2 quarterly earnings call. Investors submitted questions through Say, a financial communication platform and asked about topics ranging from international expansion to the company’s stance on bitcoin. Investors submitted 83 questions and voted on their favorite ones. Executives answered three of them during the call.
“They are, for the most part, very thoughtful, longer-term thinkers [that] have creative and clever questions,” Mr. Bixby said, describing the company’s individual shareholders. But they can also change their minds quickly, he said.
Companies during the pandemic have catered their messaging to novice investors, as people have taken up investing while spending more time at home, said Evan Pondel, chief executive at Triunfo Partners LLC, an investor relations firm.
Individual investors are often customers of the companies that they invest in, according to Mr. Pondel. “Companies are realizing that individual investors are an important audience,” he said.
Lemonade was one of several companies that took advantage of the trading frenzy earlier this year to raise funds. The company sold stock in early January, its first offering since the IPO last year, raising about $640 million. In the month before the offering, the company’s shares doubled, closing at about $183 on Jan. 11, the day the company announced its offering.
The company is using the proceeds to expand into auto insurance later this year, Mr. Bixby said. Lemonade currently offers insurance coverage for life, pets, homeowners and renters.
Lemonade had about one million customers as of Dec. 31, compared with 643,118 a year earlier. The company posted a net loss of $122.3 million for the year ending Dec. 31, compared with a net loss of $108.5 million the previous year.
Mr. Bixby said he was initially wary of the company’s overtures to individual investors. It is difficult to assess the investors’ backgrounds and reputations in the same way that companies typically assess institutional investors, he said.
But he adjusted, he said. “I think it requires innovation and boldness and willingness to try new things.”