I am going to take a deep dive into Kantone Holdings Limited’s (SEHK:1059) most recent ownership structure, not a frequent subject of discussion among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct 1059’s shareholder registry. All data provided is as of the most recent financial year end.
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Institutional Ownership
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. 1059 hardly has any institutional ownership, leaving investors little to think about sharp price volatility in the stock that could take place due to institutional trading.
General Public Ownership
The general public holds a substantial 34.83% stake in 1059, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Public Company Ownership
Another group of owners that a potential investor in 1059 should consider are other public companies, with a stake of 64.94%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence 1059’s business strategy. Thus, investors should dig deeper into 1059’s business relations with these companies and how it can affect shareholder returns in the long-term.
What this means for you:
Institutional ownership in 1059 is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only determining factor when you’re building an investment thesis for 1059. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Kantone Holdings’s share price. I urge you to complete your research by taking a look at the following: