Can We See Significant Institutional Ownership On The Avita Medical Limited (ASX:AVH) Share Register?

The big shareholder groups in Avita Medical Limited (ASX:AVH) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.

Avita Medical is not a large company by global standards. It has a market capitalization of AU$749m, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about AVH.

Check out our latest analysis for Avita Medical

ASX:AVH Ownership Summary, August 12th 2019
ASX:AVH Ownership Summary, August 12th 2019

What Does The Institutional Ownership Tell Us About Avita Medical?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Avita Medical does have institutional investors; and they hold 53% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Avita Medical’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:AVH Income Statement, August 12th 2019
ASX:AVH Income Statement, August 12th 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 23% of Avita Medical shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Avita Medical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 some shares in Avita Medical Limited. As individuals, the insiders collectively own AU$25m worth of the AU$749m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 10% stake in the company, will not easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 9.4% stake in AVH. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

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.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.