Breaking Down Harvest One Cannabis Inc's (CVE:HVT) Ownership Structure

In this analysis, my focus will be on developing a perspective on Harvest One Cannabis Inc’s (TSXV:HVT) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company's corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, I will take a look at HVT's shareholders in more detail.

See our latest analysis for Harvest One Cannabis

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company's stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. HVT hardly has any institutional ownership, leaving investors little to think about sharp volatility in the stock that could take place due to institutional trading. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 7.38% ownership in HVT, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would also examine the rest of its ownership structure in more detail to determine how the company's major shareholders can affect its investment case.

Insider Ownership

Insiders form another group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. HVT insiders hold a minor 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. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.

General Public Ownership

A big stake of 56.52% in HVT 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.

Public Company Ownership

Potential investors in HVT should also look at another important group of investors: other public companies, with a stake of 35.81%, who are primarily invested because of strategic and capital gain interests. An ownership of this size indicates a strong financial backing and has the potential to influence HVT's business strategy. Thus, investors should dig deeper into HVT's business relations with these companies and how it can affect shareholder returns in the long-term.

Next Steps:

While HVT has a low level of institutional ownership, active hedge funds still hold a significant stake in the company. The participation of these active investors has been linked to the volatile nature of share prices. A factor to consider is whether HVT offers enough margin of safety compared to its intrinsic value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around HVT. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Harvest One Cannabis’s share price. I highly recommend you to complete your research by taking a look at the following:

• 1. Financial Health: Is HVT’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. 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.