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Today, I will be analyzing AEI Corporation Ltd’s (SGX:AWG) 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. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct AWG’s shareholder registry.
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Institutional Ownership
In AWG’s case, institutional ownership stands at 50.68%, 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 AWG 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. In the case of AWG, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into AWG’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider Ownership
Another 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. AWG insiders are also influential stakeholders with 8.53% ownership in the company. This level of stake with insiders indicate highly aligned interests of shareholders and company executives. 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 Ownership
A substantial ownership of 27.29% in AWG 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 Ownership
Another important group of owners for potential investors in AWG are private companies that hold a stake of 13.50% in AWG. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in AWG, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.