I am going to take a deep dive into SITO Mobile Ltd’s (NASDAQ:SITO) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at SITO’s shareholders in more detail.See our latest analysis for SITO Mobile
Institutional OwnershipWith an institutional ownership of 12.50%, SITO can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. In the case of SITO, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into SITO’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipI find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. 33.09% ownership of SITO insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings 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 52.65% in SITO 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 important group of owners for potential investors in SITO are private companies that hold a stake of 1.76% in SITO. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence SITO’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
What this means for you:
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors 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 SITO. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of SITO Mobile’s share price. I highly recommend you to complete your research by taking a look at the following:
1. Future Outlook: What are well-informed industry analysts predicting for SITO’s future growth? Take a look at our free research report of analyst consensus for SITO’s outlook.
2. Past Track Record: Has SITO 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 SITO’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.