Should You Be Concerned About Cinedigm Corp's (NASDAQ:CIDM) Shareholders?

In this analysis, my focus will be on developing a perspective on Cinedigm Corp’s (NASDAQ:CIDM) latest ownership structure, a less discussed, but important factor. A company's ownership structure is often linked to its share performance in both the long- and short-term. Differences in ownership structure of companies can have a profound effect on how management's incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, it is beneficial for us to examine CIDM's ownership structure in more detail.

View our latest analysis for Cinedigm

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company's stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 9.90%, CIDM doesn't seem too exposed to higher volatility resulting from institutional trading.

Insider Ownership

Insiders 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. CIDM insiders hold a significant stake of 63.99% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn't necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

A big stake of 25.45% in CIDM 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

Another group of owners that a potential investor in CIDM should consider are private companies, with a stake of 0.66%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence CIDM's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

Institutional ownership level and composition in CIDM is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for CIDM, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as Cinedigm's past track record and financial health. I urge you to complete your research by taking a look at the following:

1. Financial Health: Is CIDM’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 CIDM 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 CIDM'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.

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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.