In this analysis, my focus will be on developing a perspective on Ark Mines Limited’s (ASX:AHK) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. 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, it is beneficial for us to examine AHK’s ownership structure in more detail.See our latest analysis for Ark Mines
Institutional OwnershipInstitutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 2.35% puts AHK on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like AHK used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
Insider OwnershipI find insiders are another 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. A major group of owners of AHK is individual insiders, sitting with a hefty 30.18% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It’s also interesting to learn what AHK insiders have been doing with their shareholdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipA big stake of 46.80% in AHK is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company OwnershipPotential investors in AHK should also look at another important group of investors: private companies, with a stake of 20.67%, 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 AHK’s business strategy. Thus, investors should dig deeper into AHK’s business relations with these companies and how it can affect shareholder returns in the long-term.
What this means for you:
With a low level of institutional ownership, investors in AHK need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only determining factor when you’re building an investment thesis for AHK. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Ark Mines’s share price. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is AHK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 2. Past Track Record: Has AHK 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 AHK’s historicals for more clarity.
- 3. 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.