In this article, I’m going to take a look at Affimed NV.’s (NASDAQ:AFMD) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. The impact of a company’s ownership structure affects both its short- and long-term performance. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine AFMD’s ownership structure in more detail.
Check out our latest analysis for AffimedInstitutional Ownership
In AFMD’s case, institutional ownership stands at 22.14%, 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 AFMD 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. With hedge funds holding a 5.14% stake in the company, its share price can experience heightened volatility. We should dig deeper into the company’s ownership structure to find how the rest of its ownership structure can impact its investment case.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. Although individuals in AFMD hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.General Public Ownership
The general public holds a substantial 45.11% stake in AFMD, making it a highly popular stock among retail investors. 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 Equity Ownership
With a stake of 8.24%, private equity firms form another important class of owners in AFMD. With a stake of 8.24%, they can influence AFMD’s key policy decisions. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.Private Company Ownership
Another important group of owners for potential investors in AFMD are private companies that hold a stake of 14.30% in AFMD. 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 AFMD’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.Next Steps:
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in AFMD. 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, ownership structure should not be the only determining factor when you’re building an investment thesis for AFMD. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Affimed’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 AFMD’s future growth? Take a look at our free research report of analyst consensus for AFMD’s outlook.
- Past Track Record: Has AFMD 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 AFMD’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.