Could The Experience Co Limited (ASX:EXP) Ownership Structure Tell Us Something Useful?

A look at the shareholders of Experience Co Limited (ASX:EXP) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.

Experience Co is a smaller company with a market capitalization of AU$142m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Experience Co.

See our latest analysis for Experience Co

ASX:EXP Ownership Summary, January 6th 2020
ASX:EXP Ownership Summary, January 6th 2020

What Does The Institutional Ownership Tell Us About Experience Co?

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.

Experience Co already has institutions on the share registry. Indeed, they own 30% of the company. 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 Experience Co’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:EXP Income Statement, January 6th 2020
ASX:EXP Income Statement, January 6th 2020

We note that hedge funds don’t have a meaningful investment in Experience Co. Looking at our data, we can see that the largest shareholder is Anthony Boucaut with 24% of shares outstanding. The second largest shareholder with 10.0%, is Viburnum Funds Pty Ltd., followed by Forager Funds Management Pty Ltd., with an ownership of 5.5%.

On studying the facts and figures more closely, we found that 6 of the top shareholders account for 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Experience Co

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in Experience Co Limited. It has a market capitalization of just AU$142m, and insiders have AU$39m 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 holds a 23% stake in EXP. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With a stake of 10.0%, private equity firms could influence the EXP board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 9.0%, of the company’s shares. 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Experience Co better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.