Stock Analysis

Elkem ASA's (OB:ELK) stock price dropped 3.3% last week; private companies would not be happy

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OB:ELK
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A look at the shareholders of Elkem ASA (OB:ELK) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private companies with 53% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private companies endured the biggest losses as the stock fell by 3.3%.

Let's take a closer look to see what the different types of shareholders can tell us about Elkem.

Our analysis indicates that ELK is potentially undervalued!

ownership-breakdown
OB:ELK Ownership Breakdown December 8th 2022

What Does The Institutional Ownership Tell Us About Elkem?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Elkem does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Elkem's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
OB:ELK Earnings and Revenue Growth December 8th 2022

Elkem is not owned by hedge funds. Sinochem Holdings Corp Ltd is currently the largest shareholder, with 53% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 2.1% and 1.5%, of the shares outstanding, respectively.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Elkem

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Elkem ASA. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own kr10.0m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Elkem. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 53%, of the Elkem stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for Elkem (2 are potentially serious!) that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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