Author: Morten Singleton
The Pfizer vaccine deserves to be this week’s biggest news and driver of market sentiment, but as well as the more obvious trends, perhaps history will also record the swing away from informational darkness as a real game-changer this year.
Whatever you feel about this week’s specific election result, the entire world is catching up with understanding the externalities of social networking – explained so acutely in Netflix’s The Social Dilemma. The arc of social media’s own story has become the way it fosters a post-truth culture. From India, Eastern Europe and the UK ‘fake news’ has become a standard feature of political debates and campaigns.
All sides of political divides are implicated.
No social or political theorist would suggest that polarised post-truth beliefs provide the right context for democracy to flourish. And yet, before we judge the political universe, we also have to accept that financial markets suffer from their own dose of undemocratic darkness as well, also borne of a lack of knowledge.
The low yield environment has ushered in a significant shift within public company share registers – away from active investors to passive funds. For issuers, especially smaller ones passed over by indices, this has made it far harder to reach potential buyers of their stock. It is no longer enough to talk to the biggest institutions. Now we must reach everyone in the long tail – from true retail investors to boutique institutions, family offices and wealth managers. Yet most listed companies do not have this type of access. To them, this long tail is ‘Dark Capital’.
However, many of these investors have themselves been left in the darkness. With MiFID II and the unbundling of broker research, levels of insight and knowledge have dropped dramatically. Therefore, the issuers of stock are also ‘Dark Equities’. Like physicists and particles of dark matter, investors know they exist, but they don’t have any reliable insight into their essential nature.
But it now seems we are turning a corner – the brilliance of knowledge is making a confident reappearance.
The electoral and legal processes in the US appear to be no match for fake news from either side. There are few who doubt democracy will be subverted. If, as many believe, Biden has won he will transition into the White House. If there are irregularities and he has not, Trump will get a second term. The noise on social media is a sideshow.
So what of Dark Capital and Dark Equities?
The case for their eventual defeat is also continuing to build. Edison is partnering with other service companies who understand the issues and are helping turn the tide. One such is ADVFN. Together we are helping democratise access to insight.
The need to banish the darkness in capital markets is something we believe in passionately. Our analysts write award-winning research. Our digital platform ensures our research is distributed globally and captures intent to purchase 24/7, giving public companies a full 360-degree view of actual and potential investor activity. This feeds Dark Dapital – whether institutional or retail – with data, knowledge and insight, which is everything they need to make fully informed decisions.