In this article, I’m going to take a look at Altaba Inc’s (NASDAQ:AABA) 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 AABA’s ownership structure in more detail.See our latest analysis for Altaba
Institutional OwnershipAABA’s 65.91% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although AABA 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 9.13% 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 AABA’s investment case.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. With 6.95% ownership, AABA insiders is an important ownership type. 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. It may be interesting to see what insiders have been doing with their shares lately. Insiders buying shares can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial needs.
General Public OwnershipA big stake of 18.01% in AABA 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.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in AABA. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for AABA. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Altaba’s share price. I urge you to complete your research by taking a look at the following:
- 1. Future Outlook: What are well-informed industry analysts predicting for AABA’s future growth? Take a look at our free research report of analyst consensus for AABA’s outlook.
- 2. Past Track Record: Has AABA 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 AABA’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.