The big shareholder groups in eMetals Limited (ASX:EMT) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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$5.8m, eMetals 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 not yet purchased shares. Let’s take a closer look to see what the different types of shareholder can tell us about eMetals.
What Does The Lack Of Institutional Ownership Tell Us About eMetals?
Small companies that are not very actively traded often lack institutional investors, but it’s less common to see large companies without them.
There are multiple explanations for why institutions don’t own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. eMetals might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.
eMetals is not owned by hedge funds. Teck Wong is currently the largest shareholder, with 4.9% of shares outstanding. Next, we have GWR Group Limited and Great Southern Flour Mills Pty Ltd as the second and third largest shareholders, holding 4.2% and 3.9%, of the shares outstanding, respectively.
A deeper look at our ownership data shows that the top 4 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. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of eMetals
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.
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.
We can see that insiders own shares in eMetals Limited. It has a market capitalization of just AU$5.8m, and insiders have AU$339k worth of shares, in their own names. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are mostly retail investors, collectively hold 86% of eMetals shares. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
It seems that Private Companies own 3.9%, of the EMT 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.
Public Company Ownership
We can see that public companies hold 4.2%, of the EMT shares on issue. We can’t be certain, but this is quite possible this is a strategic stake. The businesses may be similar, or work together.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we’ve discovered 5 warning signs for eMetals (4 can’t be ignored!) that you should be aware of before investing here.
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 firstname.lastname@example.org. 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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