New Blood in the Stock Transfer Industry…Finally!
On March 8, 2010 Broadridge Financial Solutions, Inc., the world’s largest provider of proxy distribution and tabulation services for investors owning stock through a broker, acquired the stock transfer business of StockTrans, Inc. This is the first time a major new player – not just a major new investor, not just an old player with a brand new name – has entered the stock transfer industry in 10 years, and only the second time in more than 40 years!
Broadridge has been hinting it might get into stock transfer with both feet ever since it starting performing registered as well as beneficial (“street”) shareholder proxy distribution and tabulation five years ago. Registered shareholder proxy work was always the realm of transfer agents, but in just a few short years Broadridge has taken this on for no less than 1,600 corporations – well over 20% of investment grade public companies in the U.S.
Broadridge seems to be pursuing stock transfer for multiple reasons:
- It already has the aforementioned toehold on a portion of the business anyway
- There are other readily promote-able synergies between what Broadridge does now and stock transfer, like financial printing and proxy solicitation
- Stock transfer has lost so many competitors there is simply ample space for a new one
- Broadridge has so many public company relationships through its almost universal “street” holder proxy distribution/tabulation coverage that it can not help but attract new stock transfer clients going forward
- Broadridge has all the necessary infrastructural bulk and staff (i.e., scale) to take on the crushing minutia of stock transfer work in an efficient and cost-effective manner
To the latter point, Broadridge will not even integrate StockTrans’ records into its own massive mainframe in the short term – the data will remain on the outside software StockTrans uses called TranStar, provided by TS Partners, Inc. (TranStar is used by many moderately-sized transfer agents in the U.S.) And StockTrans’ people will also remain on board, including their founder and CEO, Jonathan Miller, which will mitigate any disruptive effects on StockTrans’ (Broadridge’s) clients and also provide Broadridge with StockTrans’ 35 years of experience in the business from a now in-house source.
So is this a “big deal”? Yes, to the extent it adds some competition back into an industry that has seen way too much consolidation in the past two decades (note our earlier articles on this under Press Room); yes in that it may prompt the entrée of other major players who see an opportunity to distinguish themselves (and make money) in an arena that is not currently populated by a scary group of competitors; and yes in that it may presage a much larger shake-up brought on by transfer agents finding themselves unable to deal with impending changes in areas like cost-basis accounting, which could cause a number of smaller players to sell out to those who can.
There are also those who think this will not be a big deal, because corporations are not going to dump a perfectly good relationship they have with their stock transfer agent just to consolidate functions with Broadridge, especially since Broadridge has taken increasing heat for being a virtual monopoly with its primary service (street proxy) – and this could impede its sales efforts in other areas. So, Broadridge might not in fact make much of a dent in the stock transfer business for some time to come.
But whatever the short-term effects, there can be no doubt that a significant develop-ment has occurred in stock transfer with Broadridge’s entry into the business, which we welcome and think will wind up being very good for the long-term health of the industry.