Today, I will be analyzing Signature Resources Ltd’s (TSXV:SGU) recent ownership structure, an important but not-so-popular subject among individual investors. 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. Therefore, it is beneficial for us to examine SGU’s ownership structure in more detail.
View our latest analysis for Signature ResourcesInsider Ownership
I find insiders are another 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. SGU insiders hold a not-so-significant 3.52% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. I will also like to check what insiders have been doing recently with their holdings. 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 Ownership
A substantial ownership of 94.63% in SGU 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 Ownership
Potential investors in SGU should also look at another important group of investors: private companies, with a stake of 1.86%, 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 SGU’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.Next Steps:
A relatively low shareholding by company insider could indicate potential misalignment of interest. However, on the other hand, this could also be a positive as the level of influence over the board of directors can also be limited. However, if you are building an investment case for SGU, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as Signature Resources’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 SGU’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 SGU 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 SGU’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.