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Trade Volume Explodes as Retail Traders Make Their Mark

NetworkNewsWire Editorial Coverage: Only three weeks into the new year, and stock trading volumes are “through the roof,” reports a Jan. 22 CNBC article , titled “Trading Volume Is Up from 2020′S Breakneck Pace as Retail Investors Jump In.” The article continues: “It’s not just equity prices that are hitting new highs in 2021. Trading volumes for stocks and options are at records as well. Much of it is being driven by retail investors, who are continuing the high level of engagement that began in 2020.” January volumes are up 92% from last year and up 33% just since December. Evidence points to increased retail trading as the primary impetus in the record-setting increase in volume with much of the real volume increase coming from little-known names in the small cap market. Electronic brokers are hitting new highs as investment markets become more retail driven, and independent investors are making marks in their own portfolios. This new dynamic puts new pressure on public companies to effectively connect with these investors and manage public interaction. But managing the transition to a retail base of investors is easier said than done. Pioneering fintech company SRAX (NASDAQ: SRAX) (SRAX Profile) is changing the dynamic between public companies and shareholders, establishing a new paradigm and perhaps even a new market. Through SRAX’s premier investor intelligence and communications platform, Sequire, companies can track their investors’ behaviors and trends and use those insights to engage both current and potential investors across multiple marketing channels. This provides new untapped arenas for public companies to interact with current and potential future shareholders. Investor interactions and analytics markets have spawned a huge industry. Broadridge Financial Solutions Inc. (NYSE: BR), a $4.5-billion global fintech leader, is a leading provider of investor communications and technology-driven solutions to banks, broker-dealers, asset and wealth managers, and corporate issuers. IHS Markit (NYSE: INFO) delivers next-generation information, analytics and solutions to 80% of the Fortune Global 500 and the world’s leading financial institutions. Some companies such as Genius Brands International Inc. (NASDAQ: GNUS), a global kids media company, and Ideanomics Inc. (NASDAQ: IDEX), which provides disruptive fintech solutions, have both seen exponential growth that likely was impelled by the new dynamic of retail driven markets.

  • Average daily volume of equities was 7 billion in 2019 and 10.9 billion in 2020. In the first days of January, the numbers exploded to 14.7 billion a day.
  • Small traders are making their presence felt; SRAX’s Sequire connects companies with this retail segment through powerful investor intelligence and communications tools.
  • SRAX’s preliminary revenue results for Q4 and full-year 2020 show numbers up in all key metrics.

Retail Trading “Primary Culprit” in Volume Increase

The market is changing, with the numbers of retail traders exploding. The CNBC articles notes that the average daily volume of equities was 7 billion in 2019 and 10.9 billion in 2020. In the first days of January, the numbers have exploded to 14.7 billion a day. “Year over year, January volumes are up 92%,” the article reported, “and from December, they are up 33%.”

What accounts for these rises? According to Rich Repetto, who tracks trading volumes at Piper Sandler, the majority of the gains are due to increased retail participation. Retail traders, or individual traders, buy or sell securities for personal accounts, while institutional traders buy and sell securities for accounts, such as pension funds and mutual fund families, that they manage for a group or institution.

Repetto says burgeoning retail participation can be traced to several things, including record volume on the Trade Reporting Facility (TRF), which reports trades not made on the exchanges; increased trades at retail brokers; and options trading being way up. “Put it all together,” says Repetto, “and the evidence points to increased retail trading as the primary culprit in the overall increase in volume.”

A recent Bloomberg article echoes the same sentiment. Noting that for the last half century markets have grown more institutionalized, Bloomberg senior editor John Authers also notes the growing power of retail investing.  “Precise numbers are annoyingly difficult to obtain,” he writes, “but 2020 looks to have had the greatest explosion in individuals trading for their own account since at least the closing days of the dot-com bubble. With Robinhood, the best-known discount trading service, reaching 13 million users this year, small traders are beginning to have an effect.”

Companies Connect with Retail Traders through Sequire

Publicly held companies are eager to connect with these small traders, but after focusing for so long on the institutional space, many are uncertain how to do so effectively. Enter SRAX (NASDAQ: SRAX), a digital marketing and consumer data-management technology company.

Through its proprietary Sequire platform, companies looking to connect with current and potential investors have access to a complete set of investor intelligence and communications tools. These tools assist companies in unlocking their shareholders’ behaviors and trends from their own data sets, monitoring trading data in real time, and engaging their shareholders in more compelling and effective ways.

“We are creating a community of public company executives that are taking back their data,” said SRAX founder and CEO Christopher Miglino. “For too long these leaders have relied on subpar data to make important capital market decisions. Our clients have seen notable results from Sequire and our marketing services, and the more companies that join in our mission the better the platform gets at identifying and securing investors. The retail investor is becoming a bigger part of the cap table, and we have mastered the connection between trading platforms such as Robinhood and the public issuer, just as these platforms attempt to become less transparent.”

A Vision for the Future

Whatever SRAX and Sequire are doing, they must be doing it right. The company’s newly released preliminary revenue results for Q4 and full-year 2020 show numbers up substantially across all key metrics, including:

  • For Q4 2020, revenue is expected to exceed analyst expectations as the numbers look to be up about 320% year over year and up 75% from Q3 2020. SRAX anticipates net revenue of approximately $4.5 million, a figure that beats the company’s guidance for the quarter.
  • Revenue for the full year should reach approximately $8.7 million, up 142% over 2019.
  • Q1 2021 revenue guidance is $5 million, a $4.7 million increase from the same quarter last year.
  • Four consecutive quarters of revenue growth for SRAX; Sequire shows seven consecutive quarters of growth.
  • Marketable securities of approximately $16 million on hand.
  • Gross margins of an estimated 73% for the quarter and 69% for the year.

“We continued to see significant demand for our Sequire platform in Q4, and this growth has continued into the first month of 2021,” said Miglino. “On the product front, we are continuing to add new features to the platform to enhance the value to our clients. We have a vision of delivering a platform that will be an essential part of every public company. We are well on our way to accomplishing this goal and think that this year will validate our leadership position in the market.”

A tsunami of retail trading created new challenges for public companies and golden opportunity for SRAX. Eye-popping growth indicates that SRAX is fast becoming the go-to source for much needed solutions.

Retail Trading Beneficiaries

The surge of small retail investors has shook up a moribund industry, creating new challenges and opportunities. All indications are that the retail surge won’t abate anytime soon and may well change the focus of the market from the institution to the individual. Among the beneficiaries are both operators and recipients of this retail surge.

Broadridge Financial Solutions Inc. (NYSE: BR), a $4.5 billion global fintech leader, is a leading provider of investor communications and technology-driven solutions to banks, broker-dealers, asset and wealth managers and corporate issuers. Broadridge’s infrastructure underpins proxy voting services for more than 50% of public companies and mutual funds globally, and processes on average more than $10 trillion in fixed income and equity securities trades per day. Broadridge is part of the S&P 500(R) Index and employs more than 12,000 associates in 17 countries.

IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80% of the Fortune Global 500 and the world’s leading financial institutions.

Genius Brands International Inc. (NASDAQ: GNUS) is a leading global kids media company developing, producing, marketing and licensing branded children’s entertainment properties and consumer products for media and retail distribution. Through licensing agreements with leading partners, characters from Genius Brands’ IP also appear on a wide range of consumer products for the worldwide retail marketplace. The company’s new Kartoon Channel! and Kartoon Classroom! are available in more than 100 million U.S. television households via a broad range of distribution platforms.

Ideanomics Inc. (NASDAQ: IDEX) is a global company focused on the convergence of financial services and industries experiencing technological disruption. IDEX’s Mobile Energy Global (MEG) division is a service provider that facilitates the adoption of electric vehicles by commercial fleet operators through offering vehicle procurement, finance and leasing, and energy-management solutions under innovative sales to financing to charging (S2F2C) business model. Ideanomics Capital is focused on disruptive fintech solutions for the financial services industry.

For more information about SRAX, please visit SRAX (NASDAQ: SRAX).

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