I am going to take a deep dive into MODE SA.’s (WSE:MOE) 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. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Now I will analyze MOE’s shareholder registry in more detail.
See our latest analysis for MODEInstitutional Ownership
Institutions account for 32.77% of MOE’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. Although MOE 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. In the case of MOE, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into MOE’s ownership structure and find out how other key ownership classes can affect its investment profile.Insider Ownership
Another 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. 9.81% ownership makes insiders an important shareholder group. 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.General Public Ownership
A substantial ownership of 19.71% in MOE is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.Private Company Ownership
Potential investors in MOE should also look at another important group of investors: private companies, with a stake of 37.71%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect MOE’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.Next Steps:
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. 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 MOE. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of MODE’s share price. I highly recommend you to complete your research by taking a look at the following:
- 1. Financial Health: Is MOE’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. Past Track Record: Has MOE 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 MOE’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.