Today, I will be analyzing Town Sports International Holdings Inc’s (NASDAQ:CLUB) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Now I will analyze CLUB’s shareholder registry in more detail.See our latest analysis for Town Sports International Holdings
Institutional OwnershipIn CLUB’s case, institutional ownership stands at 21.27%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although CLUB 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. Hedge funds, considered active investors, hold a 46.98% stake in the company, which may be the cause of high short-term volatility in the stock price. But I also examine other ownership types and their potential impact on CLUB’s investment case.
Insider OwnershipInsiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. CLUB insiders are also influential stakeholders with 7.88% ownership in the company. An insider stake of this level indicates that executives are highly aligned with the shareholders as both stand to gain when the value of the company rises. 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 OwnershipA big stake of 23.86% in CLUB 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.
I suggest investors seek some degree of margin of safety due to high institutional ownership in CLUB, in particular due to the strong presence of active hedge fund investors. This may enable shareholders to comfortably invest in the company and 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 CLUB, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Town Sports International Holdings’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 CLUB’s future growth? Take a look at our free research report of analyst consensus for CLUB’s outlook.
- Past Track Record: Has CLUB 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 CLUB’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.