Could The Hotel Property Investments (ASX:HPI) Ownership Structure Tell Us Something Useful?

The big shareholder groups in Hotel Property Investments (ASX:HPI) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of AU$473m, Hotel Property Investments is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about HPI.

Check out our latest analysis for Hotel Property Investments

ASX:HPI Ownership Summary, October 22nd 2019
ASX:HPI Ownership Summary, October 22nd 2019

What Does The Institutional Ownership Tell Us About Hotel Property Investments?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Hotel Property Investments already has institutions on the share registry. Indeed, they own 44% of the company. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Hotel Property Investments, (below). Of course, keep in mind that there are other factors to consider, too.

ASX:HPI Income Statement, October 22nd 2019
ASX:HPI Income Statement, October 22nd 2019

Hotel Property Investments is not owned by hedge funds. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Hotel Property Investments

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

We can see that insiders own shares in Hotel Property Investments. In their own names, insiders own AU$7.1m worth of stock in the AU$473m 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 — mostly retail investors — own 54% of Hotel Property Investments. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Hotel Property Investments better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.