Great week for Cogstate Limited (ASX:CGS) insiders who have 42% stake and they haven’t stopped buying

Key Insights

• Cogstate's significant insider ownership suggests inherent interests in company's expansion
• 55% of the business is held by the top 4 shareholders
• Insiders have bought recently

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To get a sense of who is truly in control of Cogstate Limited (ASX:CGS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 42% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Our data shows that insiders recently bought shares in the company and they were rewarded after market cap rose AU$46m last week.

In the chart below, we zoom in on the different ownership groups of Cogstate.

View our latest analysis for Cogstate

What Does The Institutional Ownership Tell Us About Cogstate?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Cogstate does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Cogstate, (below). Of course, keep in mind that there are other factors to consider, too.

Cogstate is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is David Dolby with 17% of shares outstanding. With 15% and 14% of the shares outstanding respectively, Dagmar Dolby Fund and Martyn Myer are the second and third largest shareholders. Martyn Myer, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board. Furthermore, CEO Bradley O'Connor is the owner of 3.7% of the company's shares.

On looking further, we found that 55% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Cogstate

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Cogstate Limited. Insiders have a AU$193m stake in this AU$464m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 6.8%, private equity firms could influence the Cogstate board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

We can see that public companies hold 5.0% of the Cogstate shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.