Should You Be Concerned About Kopin Corporation's (NASDAQ:KOPN) Investors?

I am going to take a deep dive into Kopin Corporation’s (NASDAQ:KOPN) most recent ownership structure, not a frequent subject of discussion among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. 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 KOPN's ownership structure in more detail.

View our latest analysis for Kopin

Institutional Ownership

Institutions account for 38.72% of KOPN's outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. With hedge funds holding a 8.63% stake in the company, its share price can experience heightened volatility. I am going to further examine KOPN's ownership structure to check how other major shareholders can affect its investment case.

Insider Ownership

Insiders form a group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A major group of owners of KOPN is individual insiders, sitting with a hefty 10.10% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn't necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

A big stake of 32.64% in KOPN 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.

Public Company Ownership

Another group of owners that a potential investor in KOPN should consider are other public companies, with a stake of 9.90%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence KOPN's business strategy. Thus, investors should dig deeper into KOPN's business relations with these companies and how it can affect shareholder returns in the long-term.

Next Steps:

With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in KOPN. This may enable shareholders to comfortably invest in the company and avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for KOPN, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Kopin’s share price. I highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Are KOPN’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 KOPN 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 KOPN'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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.