Do Directors Own INSCAPE Corporation (TSE:INQ) Shares?

If you want to know who really controls INSCAPE Corporation (TSE:INQ), then you’ll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

With a market capitalization of CA$28m, INSCAPE is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about INQ.

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See our latest analysis for INSCAPE

TSX:INQ Ownership Summary, May 24th 2019
TSX:INQ Ownership Summary, May 24th 2019

What Does The Institutional Ownership Tell Us About INSCAPE?

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.

INSCAPE already has institutions on the share registry. Indeed, they own 13% of the company. 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. 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 INSCAPE, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:INQ Income Statement, May 24th 2019
TSX:INQ Income Statement, May 24th 2019

It looks like hedge funds own 15% of INSCAPE shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of INSCAPE

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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.

It seems that insiders own more than half the INSCAPE Corporation stock. This gives them a lot of power. Given it has a market cap of CA$28m, that means they have CA$17m worth of shares. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public holds a 13% stake in INQ. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.