Why Smooth Rock Ventures Corp’s (CVE:SOCK) Ownership Structure Is Important

Today, I will be analyzing Smooth Rock Ventures Corp’s (CVE:SOCK) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Now I will analyze SOCK’s shareholder registry in more detail.

See our latest analysis for Smooth Rock Ventures
TSXV:SOCK Ownership_summary July 6th 18
TSXV:SOCK Ownership_summary July 6th 18

Insider Ownership

I 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. 6.10% ownership makes insiders an important shareholder group. This level of ownership indicates closely aligned interests of shareholders and management. It may be interesting to see what insiders have been doing with their shares lately. Insiders buying shares can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial needs.

General Public Ownership

A substantial ownership of 70.06% in SOCK is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.

Private Company Ownership

Potential investors in SOCK should also look at another important group of investors: private companies, with a stake of 23.84%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect SOCK’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

Next Steps:

A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, ownership structure should not be the only focus of your research when constructing an investment thesis around SOCK. Rather, you should be examining fundamental factors such as Smooth Rock Ventures’s past track record and financial health. I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is SOCK’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.
  2. Past Track Record: Has SOCK 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 SOCK’s historicals for more clarity.
  3. 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.