Could The Quantify Technology Holdings Limited (ASX:QFY) Ownership Structure Tell Us Something Useful?

Every investor in Quantify Technology Holdings Limited (ASX:QFY) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

With a market capitalization of AU$4.5m, Quantify Technology Holdings is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about Quantify Technology Holdings.

Check out our latest analysis for Quantify Technology Holdings

ASX:QFY Ownership Summary, January 24th 2020
ASX:QFY Ownership Summary, January 24th 2020

What Does The Institutional Ownership Tell Us About Quantify Technology Holdings?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors own 9.7% of Quantify Technology Holdings. 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 Quantify Technology Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:QFY Income Statement, January 24th 2020
ASX:QFY Income Statement, January 24th 2020

We note that hedge funds don’t have a meaningful investment in Quantify Technology Holdings. Our data suggests that Mark Lapins, who is also the company’s Other Key Executive, holds the most number of shares at 9.5%. When an insider holds a sizeable amount of a company’s stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. The second largest shareholder with 7.3%, is Morgan Stanley, Investment Banking and Brokerage Investments, followed by Big Al Investments Pty Ltd, with an ownership of 5.5%.

A deeper look at our ownership data shows that the top 18 shareholders collectively hold less than 50% of the register, suggesting a large group of small holders where no one share holder has a majority.

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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Quantify Technology Holdings

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 most recent data indicates that insiders own a reasonable proportion of Quantify Technology Holdings Limited. It has a market capitalization of just AU$4.5m, and insiders have AU$668k worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 64% of Quantify Technology Holdings shares. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

It seems that Private Companies own 11%, of the QFY stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Quantify Technology Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 7 warning signs with Quantify Technology Holdings (at least 5 which make us uncomfortable) , and understanding them should be part of your investment process.

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.