A new way to monetize your shares: Shareholder Vote Exchange
Introduction
A few weeks ago, I was invited to a podcast to talk about my investing journey and process. The podcast was Time in the Market: Investor Profiles and Journeys, a podcast by a new site called Shareholder Vote Exchange. Although the episode wasn’t about the site, we did get into a little chat off-camera and I like the idea of it.
Essentially, SVE provides a first-of-its-kind platform for trading the voting rights that you get by owning stocks. I find the idea brilliant, as it is something I never thought about myself. Unfortunately, right now it is only accessible to US citizens, so I couldn’t try it out myself. However, I do want to give them a platform to talk about it.
I’ll hand it over to the founder of Shareholder Vote Exchange, Preston Yadegar now.
How Can Investors Profit From Their Voting Rights?
Unlocking this residual value is why I created Shareholder Vote Exchange (SVE). With SVE, investors can now buy and sell shareholder voting rights for the very first time. The value proposition is simple:
Passive investors who are not interested in voting can monetize their votes to generate supplemental income, instead of letting these assets go to waste.
Active investors and companies can purchase these votes to achieve their strategic objectives, like changing the board, achieving quorum, etc.
Whenever a company holds a shareholders’ meeting, investors can go on SVE to list their votes for sale. Investors typically receive their proxies by mail or email, and can sell these assets on SVE to generate extra income, sort of like a bonus dividend.
How Much Are Shareholder Voting Rights Worth?
The best way to think about how much votes are worth is as a percentage of their share price, something we refer to as “vote yield”. If a stock trades for $100 and each vote is worth $2, then the vote yield is 2%. This measure is analogous to dividend yield, and it works well because it creates a standardized basis to compare vote values across different companies.
With that in mind, academic papers suggest that shareholder voting rights can be worth anywhere from under 0.1% to just north of 5%. So the bigger question is “Why are some votes worth more than others?”
The value of shareholder voting rights is determined by several factors such as the presence of activist investors, company performance, and the specific proposals to be voted upon in a particular meeting. Votes are particularly valuable when there is a clear opportunity to create value at a given company. If control can be utilized to improve a company’s management, operations, financing, or strategy, then the demand and price of votes may increase substantially.
As an example, shareholder votes for ARCC (Ares Capital Corporation) recently sold for $0.22 each, which comes out to an effective yield of 1.2% (based on the share price as of the record date for the meeting). These votes were for a special meeting to decide whether or not the company could issue additional equity. If the resolution passed (which it ultimately did), then dilution would likely increase. Since this outcome could have a material impact for existing investors, the votes were fairly valuable.
While an extra 1% might not seem like much at first, these earnings can compound to create significant gains over time. Over a 20 year time horizon, going from a 7% to an 8% annualized return would result in an additional 20% increase in your final portfolio value. The core value proposition of SVE is to be found in the long-term gains which investors can realize by taking advantage of their overlooked assets.
Pricing
SVE charges a 10% commission for all trades in its auctions. When investors sell their votes on SVE, they keep 90% of their vote value. Similarly, buyers pay an extra 10% fee on top of their winning bids.
Because passive investors currently get no value from their voting rights, we believe the 10% take rate is reasonable and still leaves sellers with the vast majority of their vote value.
For buyers, the commission comes out to a small premium on top of the underlying vote value, which is still a significantly cheaper alternative to acquiring shares outright.
This pricing structure means sellers never have to deposit cash to get started SVE. They can simply sell their votes and withdraw their proceeds over time, creating a new cash flow stream.
Check SVE’s website for an updated pricing schedule.
How to Get Started
It takes just a couple minutes to start earning from your shareholder votes. To get started, you can register for a free account on SVE to manage your votes.
The second step is to verify your shareholder voting rights using either our automated or manual methods. For those who want an easy and convenient process, you can connect your outside accounts to SVE. For those who want granular control and customization, you can manually upload your voting information for each meeting.
Once your votes have been successfully verified, they can be sold in our voting auctions, where investors can buy and sell votes for different shareholder meetings. After the meeting has passed and your votes have been sold, you’ll receive your earnings in your SVE account, which can then be withdrawn to any bank or brokerage account.
Summary
Overall, SVE is an innovative way to extract value from stocks in your portfolio. It’s especially beneficial to passive investors who don’t utilize their shareholder voting rights.
These investors can sell their votes on SVE to potentially increase their near-term income and long-term returns. Although trading votes is a relatively new concept, investors can use SVE to earn more money from their equity portfolio with little additional effort.
Conclusion
Thanks to Preston for showcasing his platform. I hope it provides some of you with value. Right now it is a new platform and needs to prove the concept. I’m looking forward to seeing if the idea catches on. I’m looking forward to any feedback in the comments, per mail or via Twitter.