Could Longtable Group Limited’s (ASX:LON) Investor Composition Influence The Stock Price?

If you want to know who really controls Longtable Group Limited (ASX:LON), then you’ll have to look at the makeup of its share registry. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

Longtable Group is a smaller company with a market capitalization of AU$33m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about Longtable Group.

See our latest analysis for Longtable Group

ASX:LON Ownership Summary, February 12th 2020
ASX:LON Ownership Summary, February 12th 2020

What Does The Institutional Ownership Tell Us About Longtable Group?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors own 16% of Longtable Group. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Longtable Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:LON Income Statement, February 12th 2020
ASX:LON Income Statement, February 12th 2020

Longtable Group is not owned by hedge funds. The company’s largest shareholder is Perennial Value Management Limited, with ownership of 14%, With 9.7% and 6.6% of the shares outstanding respectively, Calogero Giovanni Rubino and CVC Limited are the second and third largest shareholders.

Additionally, we found that the top 15 have the combined ownership of 51% in the company, suggesting that no one share holder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Longtable Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Longtable Group Limited. It has a market capitalization of just AU$33m, and insiders have AU$6.6m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, with a 49% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 6.6%, private equity firms could influence the LON board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

We can see that Private Companies own 8.4%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks, for example – Longtable Group has 5 warning signs (and 3 which can’t be ignored) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.