Today, I will be analyzing African Battery Metals Plc’s (AIM:ABM) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. 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 ABM’s shareholders in more detail.View our latest analysis for African Battery Metals
Institutional OwnershipWith an institutional ownership of 33.37%, ABM 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 However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. In the case of ABM, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into ABM’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. ABM insiders are also influential stakeholders with 5.89% ownership in the company. This level of ownership indicates closely aligned interests of shareholders and management. 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.
General Public OwnershipA big stake of 47.36% in ABM is held by the general public. 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 important group of owners for potential investors in ABM are private companies that hold a stake of 13.38% in ABM. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect ABM’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
ABM’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 ABM. Rather, you should be looking at fundamental drivers such as African Battery Metals’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- 1. Financial Health: Is ABM’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.