Today, I will be analyzing xG Technology Inc’s (NASDAQ:XGTI) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-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 XGTI’s shareholders in more detail.View our latest analysis for xG Technology
Institutional OwnershipXGTI’s 11.37% 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. 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. Considering hedge funds hold a stake of 6.89% in the company, XGTI shares may experience high short-term volatility as this class of institutions are frequently found to sell significantly during market-wide shocks. I am going to further examine XGTI’s ownership structure to check how other major shareholders can affect its 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. XGTI insiders are also influential stakeholders with 9.55% ownership in the company. 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. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.
General Public OwnershipA substantial ownership of 70.81% in XGTI 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 OwnershipPotential investors in XGTI should also look at another important group of investors: private companies, with a stake of 1.39%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence XGTI’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in XGTI. 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, if you are building an investment case for XGTI, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as xG Technology’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is XGTI’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.
- Past Track Record: Has XGTI 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 XGTI’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.