Today, I will be analyzing Adavale Resources Limited’s (ASX:ADD) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. 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 ADD’s shareholder registry. All data provided is as of the most recent financial year end.
See our latest analysis for Adavale Resources
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. With hardly any institutional ownership, ADD stock poses limited concern relating to the effect institutional block trades have on its stock price.
Insider Ownership
Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. A major group of owners of ADD is individual insiders, sitting with a hefty 68.57% 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 ADD insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
The general public holds a substantial 30.22% stake in ADD, 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
Potential investors in ADD should also look at another important group of investors: private companies, with a stake of 0.95%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence ADD’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.