Why UpSnap Inc’s (CNSX:UP) Investor Composition Impacts Your Returns

I am going to take a deep dive into UpSnap Inc’s (CNSX:UP) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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. Now I will analyze UP’s shareholder registry in more detail.

Check out our latest analysis for UpSnap
CNSX:UP Ownership_summary July 13th 18
CNSX:UP Ownership_summary July 13th 18

Institutional Ownership

In UP’s case, institutional ownership stands at 30.57%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. In the case of UP, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into UP’s ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

An important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. Although individuals in UP hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. 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.
CNSX:UP Insider_trading July 13th 18
CNSX:UP Insider_trading July 13th 18

General Public Ownership

A big stake of 19.26% in UP is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Private Company Ownership

Potential investors in UP should also look at another important group of investors: private companies, with a stake of 49.88%, 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 UP’s business strategy. Thus, investors should dig deeper into UP’s business relations with these companies and how it can affect shareholder returns in the long-term.

Next Steps:

UP’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around UP. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of UpSnap’s share price. I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is UP’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 UP 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 UP’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.