In this article, I’m going to take a look at Getlink SE’s (EPA:GET) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-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. Therefore, it is beneficial for us to examine GET’s ownership structure in more detail.
Institutional OwnershipInstitutions account for 28.94% of GET’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of 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. Hedge funds, considered active investors, hold a 9.19% stake in the company, which may be the cause of high short-term volatility in the stock price. I am going to further examine GET’s ownership structure to check how other major shareholders can affect its investment case.
Insider OwnershipI 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. A stake of less than 1% in GET is relatively small, though at least there is still some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. 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 45.97% stake in GET, making it a highly popular stock among retail investors. 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.
Public Company OwnershipAnother important group of owners for potential investors in GET are other public companies that hold a stake of 15.88% in GET. These are the companies that are mainly invested due to their strategic interests or incentivized by reaping capital gains on investments. An ownership of this size indicates a strong financial backing and has the potential to influence GET’s business strategy. Thus, investors should dig deeper into GET’s business relations with these companies and how it can affect shareholder returns in the long-term.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in GET. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for GET, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Getlink’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for GET’s future growth? Take a look at our free research report of analyst consensus for GET’s outlook.
- Past Track Record: Has GET 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 GET’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.