Should You Be Concerned About Imperial Pacific Limited’s (ASX:IPC) Investors?

In this article, I’m going to take a look at Imperial Pacific Limited’s (ASX:IPC) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-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. Therefore, it is beneficial for us to examine IPC’s ownership structure in more detail.

See our latest analysis for Imperial Pacific
ASX:IPC Ownership_summary July 4th 18
ASX:IPC Ownership_summary July 4th 18

Institutional Ownership

Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. With an institutional ownership of 1.91%, IPC doesn’t seem too exposed to higher volatility resulting from institutional trading.

Insider Ownership

I find insiders are an 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. 77.76% ownership of IPC insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It’s also interesting to learn what IPC insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.

General Public Ownership

A substantial ownership of 15.38% in IPC is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.

Private Company Ownership

Another important group of owners for potential investors in IPC are private companies that hold a stake of 4.95% in IPC. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence IPC’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

With a low level of institutional ownership, investors in IPC need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around IPC. Rather, you should be looking at fundamental drivers such as Imperial Pacific’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Is IPC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has IPC been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of IPC’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.