In this analysis, my focus will be on developing a perspective on TPG Telecom Limited’s (ASX:TPM) latest ownership structure, a less discussed, but important factor. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Now I will analyze TPM’s shareholder registry 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 9.25% puts TPM on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. With 11 analysts covering TPM, it doesn’t seem to be a company that would fly under the institutions’ radar. Perhaps these skilled market participants are simply not interested in the business.
Insider OwnershipI find insiders are an 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. TPM insiders hold a significant stake of 35.44% 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 TPM 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 substantial ownership of 29.06% in TPM 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 OwnershipPotential investors in TPM should also look at another important group of investors: private companies, with a stake of 1.18%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TPM’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Institutional ownership in TPM 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 TPM, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as TPG Telecom’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for TPM’s future growth? Take a look at our free research report of analyst consensus for TPM’s outlook.
- Past Track Record: Has TPM 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 TPM’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.