I am going to take a deep dive into Seadrill Limited’s (NYSE:SDRL) most recent ownership structure, not a frequent subject of discussion among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, it is beneficial for us to examine SDRL’s ownership structure in more detail.Check out our latest analysis for Seadrill
Institutional OwnershipInstitutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With an institutional ownership of 4.86%, SDRL doesn’t seem too exposed to higher volatility resulting from institutional trading. SDRL is covered by more than three analysts. This leaves few reasons on why institutions wouldn’t have discovered the company.
Insider OwnershipInsiders form a 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. A major group of owners of SDRL is individual insiders, sitting with a hefty 23.61% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It’s also interesting to learn what SDRL insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipA big stake of 66.45% in SDRL 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 OwnershipAnother group of owners that a potential investor in SDRL should consider are private companies, with a stake of 5.08%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence SDRL’s business strategy. Thus, investors should dig deeper into SDRL’s business relations with these companies and how it can affect shareholder returns in the long-term.
Institutional ownership level and composition in SDRL is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for SDRL, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as Seadrill’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for SDRL’s future growth? Take a look at our free research report of analyst consensus for SDRL’s outlook.
- Past Track Record: Has SDRL 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 SDRL’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.