Today, I will be analyzing eSense-Lab Ltd’s (ASX:ESE) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Now I will analyze ESE’s shareholder registry in more detail.Check out our latest analysis for eSense-Lab
Institutional OwnershipInstitutional 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. A low institutional ownership of 7.88% puts ESE on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Stocks with low coverage such as ESE, attracts renowned investor Peter Lynch, who has benefited from the momentum of institutions buying into a stock as it gained popularity.
Insider OwnershipI 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. ESE insiders hold a significant stake of 94.49% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. 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.
Private Company OwnershipAnother group of owners that a potential investor in ESE should consider are private companies, with a stake of 5.16%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence ESE’s business strategy. Thus, investors should dig deeper into ESE’s business relations with these companies and how it can affect shareholder returns in the long-term.
Institutional ownership in ESE is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, other important factors we must never forget to assess are the fundamentals. I recommend you take a look at our latest free analysis report on eSense-Lab to see ESE’s fundamentals and whether it could be considered an undervalued opportunity.
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