Could The Elders Limited (ASX:ELD) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
October 13, 2021
ASX:ELD
Source: Shutterstock

Every investor in Elders Limited (ASX:ELD) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.

Elders has a market capitalization of AU$2.0b, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Elders.

View our latest analysis for Elders

ownership-breakdown
ASX:ELD Ownership Breakdown October 13th 2021

What Does The Institutional Ownership Tell Us About Elders?

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.

As you can see, institutional investors have a fair amount of stake in Elders. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Elders' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ASX:ELD Earnings and Revenue Growth October 13th 2021

Hedge funds don't have many shares in Elders. Our data shows that Greencape Capital Pty Ltd is the largest shareholder with 5.1% of shares outstanding. The second and third largest shareholders are The Vanguard Group, Inc. and Challenger Limited, with an equal amount of shares to their name at 5.0%. In addition, we found that Mark Allison, the CEO has 0.5% of the shares allocated to their name.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Elders

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in Elders Limited. This is a big company, so it is good to see this level of alignment. Insiders own AU$28m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a substantial 58% stake in Elders, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Elders has 2 warning signs we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

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