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

If you want to know who really controls SDI Limited (ASX:SDI), then you’ll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of 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.’

SDI is a smaller company with a market capitalization of AU$111m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are not on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about SDI.

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See our latest analysis for SDI

ASX:SDI Ownership Summary, May 27th 2019
ASX:SDI Ownership Summary, May 27th 2019

What Does The Lack Of Institutional Ownership Tell Us About SDI?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. It is also possible that fund managers don’t own the stock because they aren’t convinced it will perform well. SDI might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

ASX:SDI Income Statement, May 27th 2019
ASX:SDI Income Statement, May 27th 2019

SDI is not owned by hedge funds. 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 SDI

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 the majority of SDI Limited. This means they can collectively make decisions for the company. Given it has a market cap of AU$111m, that means they have AU$62m worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 38% ownership, the general public have some degree of sway over SDI. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 5.6%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

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

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.