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Every investor in AdAlta Limited (ASX:1AD) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
AdAlta is a smaller company with a market capitalization of AU$21m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about 1AD.
See our latest analysis for AdAlta
What Does The Institutional Ownership Tell Us About AdAlta?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
AdAlta already has institutions on the share registry. Indeed, they own 46% of the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AdAlta's historic earnings and revenue, below, but keep in mind there's always more to the story.
It looks like hedge funds own 8.6% of AdAlta shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of AdAlta
The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
I can report that insiders do own shares in AdAlta Limited. As individuals, the insiders collectively own AU$1.1m worth of the AU$21m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.