I am going to take a deep dive into Almirall SA.’s (BME:ALM) 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. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, I will take a look at ALM’s shareholders in more detail.See our latest analysis for Almirall
Institutional OwnershipALM’s 17.23% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly 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 ALM, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into ALM’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipAnother 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 ALM hold only a minor stake, given ALM is a large-cap company, it is relatively meaningful. This is a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. 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 OwnershipThe general public holds a substantial 15.87% stake in ALM, making it a highly popular stock among retail investors. 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. 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 OwnershipAnother group of owners that a potential investor in ALM should consider are private companies, with a stake of 66.64%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in ALM, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
ALM’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will enable shareholders to comfortably invest in the company while 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 determining factor when you’re building an investment thesis for ALM. Rather, you should be looking at fundamental drivers such as Almirall’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ALM’s future growth? Take a look at our free research report of analyst consensus for ALM’s outlook.
- Past Track Record: Has ALM 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 ALM’s historicals for more clarity.
- 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.