In this analysis, my focus will be on developing a perspective on West Wits Mining Limited’s (ASX:WWI) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, I will take a look at WWI’s shareholders in more detail.View our latest analysis for West Wits Mining
Institutional OwnershipInstitutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With an institutional ownership of 2.62%, WWI doesn’t seem too exposed to higher volatility resulting from institutional trading.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. WWI insiders hold a significant stake of 12.54% 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). Another aspect of insider ownership is to learn about their recent transactions. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipThe general public holds a substantial 69.02% stake in WWI, making it a highly popular stock among retail investors. 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 WWI are private companies that hold a stake of 9.16% in WWI. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in WWI, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
With a low level of institutional ownership, investors in WWI 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 WWI. Rather, you should be examining fundamental factors such as West Wits Mining’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is WWI’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 WWI 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 WWI’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.