In This Article:
Today, I will be analyzing Pearl Oriental Oil Limited’s (SEHK:632) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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 632’s shareholder registry.
See our latest analysis for Pearl Oriental Oil
Institutional Ownership
Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. The company hardly has institutions in its ownership structure, indicating limited concern for investors to worry about potential sell-offs that could arise due to extensive liquidation.
Insider Ownership
Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 632 insiders hold a significant stake of 37.42% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public Ownership
The general public holds a substantial 49.60% stake in 632, 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.
Private Company Ownership
Another group of owners that a potential investor in 632 should consider are private companies, with a stake of 12.34%. 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 632’s business strategy. Thus, investors should dig deeper into 632’s business relations with these companies and how it can affect shareholder returns in the long-term.