Do Insiders Own Lots Of Shares In Respiri Limited (ASX:RSH)?

If you want to know who really controls Respiri Limited (ASX:RSH), 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. 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.

With a market capitalization of AU$45m, Respiri is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Respiri.

See our latest analysis for Respiri

ASX:RSH Ownership Summary, January 30th 2020
ASX:RSH Ownership Summary, January 30th 2020

What Does The Institutional Ownership Tell Us About Respiri?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Respiri does have institutional investors; and they hold 5.3% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Respiri’s earnings history, below. Of course, the future is what really matters.

ASX:RSH Income Statement, January 30th 2020
ASX:RSH Income Statement, January 30th 2020

Hedge funds don’t have many shares in Respiri. The company’s largest shareholder is Bruce Mathieson, with ownership of 13%, Next, we have Netwealth Investments Ltd. and Braun Karl as the second and third largest shareholders, holding 4.4% and 2.5%, of the shares outstanding, respectively.

Our studies suggest that the top 20 shareholders collectively control less than 50% of the company’s shares, meaning that the company’s shares are widely disseminated and there is no dominant shareholder.

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. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Respiri

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. 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.

It seems insiders own a significant proportion of Respiri Limited. Insiders own AU$11m worth of shares in the AU$45m company. 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, mostly retail investors, hold a substantial 66% stake in RSH, suggesting it is a fairly popular stock. 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 3.7%, of the RSH stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks, for example – Respiri has 6 warning signs (and 2 which are potentially serious) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.