In This Article:
In this analysis, my focus will be on developing a perspective on TiGenix NV’s (ENXTBR:TIG) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. 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 TIG’s shareholder registry.
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Institutional Ownership
In TIG’s case, institutional ownership stands at 11.09%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although TIG has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. Hedge funds, considered active investors, hold a 67.37% stake in the company, which may be the cause of high short-term volatility in the stock price. But I also examine other ownership types and their potential impact on TIG’s investment case.
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. Although individuals in TIG hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. I will also like to check what insiders have been doing recently with their holdings. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
Private Company Ownership
Another group of owners that a potential investor in TIG should consider are private companies, with a stake of 0.0032%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TIG’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Next Steps:
I suggest investors seek some degree of margin of safety due to high institutional ownership in TIG, in particular due to the strong presence of active hedge fund investors. This may enable shareholders to comfortably invest in the company and avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around TIG. Instead, you should be evaluating company-specific factors such as TiGenix’s past track record and financial health. I urge you to complete your research by taking a look at the following: