Investor Activism – Can A Seed-Stage Startup Really Change The Way Listed Companies Do Business?

Hedge fund managers do it. Very high net worth individuals do it. And just occasionally, pension funds and similar institutions do it too. If you haven’t guessed, I’m talking about shareholders who have a tendency towards activism. While most investors are content to passively collect the dividend payments while holding shares in a particular company, some will deploy their voting muscle in support of radical change. In practice, that could mean a campaign to ditch a CEO, divest a part of the business, move manufacturing to a cheaper location or cut down on staff. Generally, the goal is increased shareholder value, as the activist sees it.

But there is, of course, another type of shareholder activism as executed by those who want large companies to adopt what they see as more sustainable or ethical ways of working – for instance by forcing a vote at an AGM aimed at ensuring manufacturing is only outsourced to third parties who meet certain labor standards.

In the real world, it’s those in the former group who have a better chance of seeing their activism succeed. Put simply, they have the financial wherewithal to buy sufficient numbers of shares to apply the kind of pressure needed to effect change. In contrast, ownership, seeking environmental or social change are often rich in idealism but challenged when it comes to shares.

So there is, perhaps, an opportunity here. Investment in impact startups is on the rise. Here in the UK, government figures released around the time of the COP26 climate summit, suggested that British startups with a focus on sustainable had raised $2 billion up to that point in 2021.

All well and good, but it’s worth asking whether many of those early-stage businesses are capable of scaling to a level where the technologies and solutions they offer can make a real difference.

So why not approach the sustainability issue from another angle – for instance, by aggregating and empowering a community of activist shareholders to put pressure of businesses that can make a difference.

Ethics Driven

That’s what Tulipshare is setting out to do. Founded by Antoine Argouges, the company’s platform enables users to buy shares in major companies in support of specific, ethics-driven campaigns. As such, a humble startup is seeking to influence the decision making of some of the world’s biggest businesses. As things stand, the company is building – or seeking to build – holdings in businesses such as Apple, Amazon, Coca Cola and Johnson and Johnson?

So what is Tulipshare setting out to achieve? I spoke to Argouges to find out.

From Dating To Activism

Argouges cut his entrepreneurial teeth as founder of Lumen, a dating app for the over 50s. He exited the company in 2020 and like many cashed-in entrepreneurs, he had time to reflect on his next steps. As he explains, it was changing consumer behavior in the face of the pandemic that drew his attention to share trading. “There was an explosion of retail investment,” he says. “People were at home and they started trading. I realised that no one was using their shareholder rights. Most people didn’t know they could vote.”

Argouges’ idea was to mobilise retail shareholders by aggregating their buying power. Thus, Tulipshare works – in part – as a share purchase platform that takes a commission on every transaction. However, the only shares available are those linked to “value-driven” campaigns.

So, what does that mean in practice? Well, it’s early days. At the time of writing, Tulipshare’s investment community holds $13,500 in Amazon shares, nearly $13,000 in Coca Cola, and $44,340 in Apple to name but three. The aim is to use these holdings to ensure that votes on ethical issues are on the agendae at the AGMs. Campaigns include a call on Amazon to improve working conditions and a drive to make Coca Cola do more to prevent plastic bottle pollution.

Argouges admits there is push-back. Getting an issue voted upon requires more than the acquisition of a certain number of shares. There are negotiations with the investor relations (IR) teams of the companies concerned.

But do the negotiations lead anywhere? In another time, in what seems like a distant universe, I used to edit a magazine tailored for board members of listed companies. IR was a key theme. If I recall correctly, activist investors of any stripe weren’t terribly popular with board members, although those with large holdings were difficult to ignore. So here’s the thing. Tulipshare is a startup that is still gaining traction. Won’t IR teams simply brush off any efforts to engage?

“The companies do tend to engage with us,” says Argouges. “If they don’t we use the governance playbook.”

It’s early days, but after launching in July, 2021, Tulipshare has succeeded in tabling 4 shareholder proposals.

That doesn’t of course, mean they’ll win the votes, but Argouges says in putting ethical issues onto the agenda, Tulipshare will put big institutional investors in a position of having to go public on their own ethical positions. This is because the votes themselves are open to scrutiny. Few investors want to be on the wrong side of the sustainability argument, and Argouges says this fact alone could help bring about the changes that Tulipshare is seeking to promote.

All this begs a question – namely who decides what is ethical? Well, the short answer is Tulipshare suggests campaigns but it is also open to suggestions from members of the community. Under the broad banner of being values-driven, Argouges says the platform is agnostic in terms of the campaigns it promotes.

Tulipshare is seeking to grow its community mainly through PR and has around 5,000 users. With $10.8 million in seed investment secured – investors include Eurazeo, Speedinvest, and Frst – it has the funding to grow its clout in the choppy waters of shareholder activism and investor relations. Will it succeed? Time will tell.

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