Every investor in European Cobalt Limited (ASX:EUC) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
European Cobalt is a smaller company with a market capitalization of AU$13m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about European Cobalt.
What Does The Institutional Ownership Tell Us About European Cobalt?
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.
European Cobalt already has institutions on the share registry. Indeed, they own 11% of the company. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 European Cobalt’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in European Cobalt. The company’s largest shareholder is Tolga Kumova, with ownership of 9.9%, Next, we have Kingslane Pty Ltd., Asset Management Arm and Robert Jewson as the second and third largest shareholders, holding 8.2% and 7.1%, of the shares outstanding, respectively. Robert Jewson also happens to hold the title of Member of the Board of Directors.
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.
While it makes sense to study institutional ownership data for a company, It also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of European Cobalt
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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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.
Our most recent data indicates that insiders own a reasonable proportion of European Cobalt Limited. Insiders have a AU$3.2m stake in this AU$13m business. 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 55% stake in EUC, suggesting it is a fairly popular stock. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company Ownership
We can see that Private Companies own 8.7%, of the shares on issue. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
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 email@example.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.
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