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Today, I will be analyzing Falcon Energy Group Limited’s (SGX:5FL) recent ownership structure, an important but not-so-popular subject among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse 5FL’s shareholder registry.
See our latest analysis for Falcon Energy Group
Institutional Ownership
Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public 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
I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of 5FL is individual insiders, sitting with a hefty 62.13% 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’s also interesting to learn what 5FL insiders have been doing with their shareholdings 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
A substantial ownership of 28.94% in 5FL is held by the general public. 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
Potential investors in 5FL should also look at another important group of investors: private companies, with a stake of 8.92%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect 5FL’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.