In this analysis, my focus will be on developing a perspective on Ausnet Financial Services Limited’s (ASX:AU1) latest ownership structure, a less discussed, but important factor. Ownership structure of a company has been found to affect share performance over time. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at AU1’s shareholder registry. All data provided is as of the most recent financial year end.
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Institutional Ownership
Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. A low institutional ownership of 8.79% puts AU1 on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Low coverage stocks like AU1 tend to be favourite picks of legendary investor Peter Lynch, who used to cash in on the rally supported by institutional buying as the stock gained popularity.
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. A major group of owners of AU1 is individual insiders, sitting with a hefty 21.16% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). 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 52.29% stake in AU1, 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.