Could Smooth Rock Ventures Corp’s (CVE:SOCK) Investor Composition Influence The Stock Price?

A look at the shareholders of Smooth Rock Ventures Corp (CVE:SOCK) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.’

Smooth Rock Ventures is not a large company by global standards. It has a market capitalization of CA$1m, which means it wouldn’t have the attention of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutions are not on the share registry. Let’s delve deeper into each type of owner, to discover more about SOCK.

See our latest analysis for Smooth Rock Ventures

TSXV:SOCK Ownership Summary October 19th 18
TSXV:SOCK Ownership Summary October 19th 18

What Does The Lack Of Institutional Ownership Tell Us About Smooth Rock Ventures?

We don’t tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it’s not particularly common.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Smooth Rock Ventures, for yourself, below.

TSXV:SOCK Income Statement Export October 19th 18
TSXV:SOCK Income Statement Export October 19th 18

Smooth Rock Ventures is not owned by hedge funds. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Smooth Rock Ventures

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own some shares in Smooth Rock Ventures Corp. It has a market capitalization of just CA$1m, and insiders have CA$71k worth of shares, in their own names. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 70% of Smooth Rock Ventures shares. 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.

Private Company Ownership

We can see that Private Companies own 24%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

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

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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 editorial-team@simplywallst.com.