In this analysis, my focus will be on developing a perspective on NI Holdings Inc’s (NASDAQ:NODK) latest ownership structure, a less discussed, but important factor. 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. Therefore, it is beneficial for us to examine NODK’s ownership structure in more detail.See our latest analysis for NI Holdings
Institutional OwnershipIn NODK’s case, institutional ownership stands at 19.61%, 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. 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. For NODK shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into NODK’s ownership type to find out how it can affect the company’s investment profile.
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. NODK insiders hold a minor stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public OwnershipA substantial ownership of 23.46% in NODK 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 NODK are private companies that hold a stake of 56.59% in NODK. 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 NODK’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
NODK’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will enable shareholders to comfortably invest in the company while 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 NODK, 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 NI Holdings’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is NODK’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.
- Valuation: What is NODK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NODK is currently mispriced by the market.
- 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.