Insiders at Cogstate Limited (ASX:CGS) must be dismayed with the latest 14% dip after buying recently

Key Insights

• Cogstate's significant insider ownership suggests inherent interests in company's expansion
• 53% of the business is held by the top 4 shareholders
• Insiders have bought recently

Every investor in Cogstate Limited (ASX:CGS) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 37% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Notably, insiders have bought shares recently. So the news of stock price falling by 14% is not something they might have been expecting soon after purchasing shares.

Let's take a closer look to see what the different types of shareholders can tell us about 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.

As you can see, institutional investors have a fair amount of stake in Cogstate. 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 Cogstate'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 Cogstate. Our data shows that David Dolby is the largest shareholder with 15% of shares outstanding. Dagmar Dolby Fund, Endowment Arm is the second largest shareholder owning 15% of common stock, and Martyn Myer holds about 14% of the company stock. Martyn Myer, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board. In addition, we found that Bradley O'Connor, the CEO has 3.2% of the shares allocated to their name.

On looking further, we found that 53% 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 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Cogstate

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our information suggests that insiders maintain a significant holding in Cogstate Limited. Insiders have a AU$57m stake in this AU$156m 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, who are usually individual investors, hold a 23% stake in Cogstate. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 8.1%, private equity firms could influence the Cogstate board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

We can see that public companies hold 4.9% of the Cogstate shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.