Significant control over IPH by retail investors implies that the general public has more power to influence management and governance-related decisions
To get a sense of who is truly in control of IPH Limited (ASX:IPH), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 50% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).
While institutions, who own 45% shares weren’t spared from last week’s AU$77m market cap drop, retail investors as a group suffered the maximum losses
In the chart below, we zoom in on the different ownership groups of IPH.
What Does The Institutional Ownership Tell Us About IPH?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that IPH does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of IPH, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:IPH Earnings and Revenue Growth May 13th 2024
Hedge funds don't have many shares in IPH. Perpetual Limited is currently the largest shareholder, with 6.6% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 5.1% of common stock, and State Street Global Advisors, Inc. holds about 5.0% of the company stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of IPH
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that IPH Limited insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about AU$10m worth of stock. This compares to a market capitalization of AU$1.4b. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
The general public-- including retail investors -- own 50% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 3.4%, of the IPH stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand IPH better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with IPH , and understanding them should be part of your investment process.
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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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.
