Today, I will be analyzing MediNet Group Limited’s (SEHK:8161) recent ownership structure, an important but not-so-popular subject among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at 8161’s shareholder registry.
Check out our latest analysis for MediNet Group
Insider Ownership
Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A major group of owners of 8161 is individual insiders, sitting with a hefty 56.25% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It’s also interesting to learn what 8161 insiders have been doing with their shareholdings 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 Ownership
The general public holds a substantial 25.00% stake in 8161, making it a highly popular stock among retail investors. 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 group of owners that a potential investor in 8161 should consider are private companies, with a stake of 18.75%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence 8161’s business strategy. Thus, investors should dig deeper into 8161’s business relations with these companies and how it can affect shareholder returns in the long-term.
Next Steps:
A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, ownership structure should not be the only focus of your research when constructing an investment thesis around 8161. Rather, you should be examining fundamental factors such as MediNet Group’s past track record and financial health. I urge you to complete your research by taking a look at the following: