Why Augean plc's (LON:AUG) Ownership Structure Is Important

I am going to take a deep dive into Augean plc’s (AIM:AUG) most recent ownership structure, not a frequent subject of discussion among individual investors. The impact of a company's ownership structure affects both its short- and long-term performance. 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 AUG's shareholders in more detail.

Check out our latest analysis for Augean

Institutional Ownership

With an institutional ownership of 98.51%, AUG can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although AUG has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For AUG shareholders, the potential of this type of share price volatility shouldn't be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into AUG's ownership type to find out how it can affect the company’s investment profile.

Insider 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. AUG insiders are also influential stakeholders with 6.39% ownership in the company. This level of stake with insiders indicate highly aligned interests of shareholders and company executives. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn't necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.

Private Company Ownership

Another important group of owners for potential investors in AUG are private companies that hold a stake of 0.39% in AUG. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence AUG's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

AUG's considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around AUG. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Augean’s share price. I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for AUG’s future growth? Take a look at our free research report of analyst consensus for AUG’s outlook.
2. Past Track Record: Has AUG 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 AUG'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.

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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.