Today, I will be analyzing Six Sigma Metals Limited’s (ASX:SI6) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at SI6’s shareholders in more detail.See our latest analysis for Six Sigma Metals
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. With an institutional ownership of 1.48%, SI6 doesn’t seem too exposed to higher volatility resulting from institutional trading.
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. SI6 insiders hold a significant stake of 15.97% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what SI6 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 79.74% in SI6 is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipAnother important group of owners for potential investors in SI6 are private companies that hold a stake of 2.81% in SI6. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence SI6’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Institutional ownership in SI6 is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, if you are building an investment case for SI6, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Six Sigma Metals’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is SI6’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.
- Past Track Record: Has SI6 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 SI6’s historicals for more clarity.
- 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.