In this article, I will take a quick look at Eumundi Group Limited’s (ASX:EBG) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. 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, I will take a look at EBG’s shareholders in more detail.See our latest analysis for Eumundi Group
Institutional OwnershipIn EBG’s case, institutional ownership stands at 10.64%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although EBG has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For EBG shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into EBG’s ownership type to find out how it can affect the company’s investment profile.
Insider OwnershipI 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. 62.03% ownership of EBG 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 may be interesting to take a look at what company insiders have been doing with their holdings 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 OwnershipA substantial ownership of 21.49% in EBG is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipPotential investors in EBG should also look at another important group of investors: private companies, with a stake of 5.84%, who are primarily invested because of strategic and capital gain interests. An ownership of this size indicates a strong financial backing and has the potential to influence EBG’s business strategy. Thus, investors should dig deeper into EBG’s business relations with these companies and how it can affect shareholder returns in the long-term.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This is to 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 EBG, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as Eumundi Group’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for EBG’s future growth? Take a look at our free research report of analyst consensus for EBG’s outlook.
- Past Track Record: Has EBG 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 EBG’s historicals for more clarity.
- 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.