In this analysis, my focus will be on developing a perspective on MSM Corporation International Limited’s (ASX:MSM) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, I will take a look at MSM’s shareholders in more detail.
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. A low institutional ownership of 4.20% puts MSM on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.
Insider OwnershipInsiders form a group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A major group of owners of MSM is individual insiders, sitting with a hefty 16.77% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public OwnershipA substantial ownership of 77.31% in MSM is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company OwnershipAnother important group of owners for potential investors in MSM are private companies that hold a stake of 1.73% in MSM. 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 MSM’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With a low level of institutional ownership, investors in MSM need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, if you are building an investment case for MSM, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as MSM International’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are MSM’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.
- 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.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.