Stock Analysis

How Much Of Element 25 Limited (ASX:E25) Do Insiders Own?

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ASX:E25
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Every investor in Element 25 Limited (ASX:E25) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Element 25 is a smaller company with a market capitalization of AU$138m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased much of the company. Let's take a closer look to see what the different types of shareholders can tell us about Element 25.

View our latest analysis for Element 25

ownership-breakdown
ASX:E25 Ownership Breakdown November 18th 2020

What Does The Institutional Ownership Tell Us About Element 25?

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.

Since institutions own only a small portion of Element 25, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

earnings-and-revenue-growth
ASX:E25 Earnings and Revenue Growth November 18th 2020

Element 25 is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Ranguta Limited with 5.5% of shares outstanding. Justin Brown is the second largest shareholder owning 4.8% of common stock, and Seamus Cornelius holds about 4.3% of the company stock. Note that the second and third-largest shareholders are also Chief Executive Officer and Chairman of the Board, respectively, meaning that the company's top shareholders are insiders.

On studying our ownership data, we found that 15 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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Element 25

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

It seems insiders own a significant proportion of Element 25 Limited. Insiders have a AU$24m stake in this AU$138m 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 -- mostly retail investors -- own 59% of Element 25. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

Our data indicates that Private Companies hold 16%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 3.6% of the Element 25 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Element 25 better, we need to consider many other factors. Take risks for example - Element 25 has 4 warning signs (and 2 which are potentially serious) we think you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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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