Could The Star Combo Pharma Ltd (ASX:S66) Ownership Structure Tell Us Something Useful?

Simply Wall St

Tue, May 28, 2019, 11:06 PM

The big shareholder groups in Star Combo Pharma Ltd (ASX:S66) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.'

Star Combo Pharma is not a large company by global standards. It has a market capitalization of AU$57m, which means it wouldn't have the attention of many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased shares. We can zoom in on the different ownership groups, to learn more about S66.

See our latest analysis for Star Combo Pharma

ASX:S66 Ownership Summary, May 29th 2019

What Does The Lack Of Institutional Ownership Tell Us About Star Combo Pharma?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Star Combo Pharma's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in Star Combo Pharma. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Star Combo Pharma

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.

It seems that insiders own more than half the Star Combo Pharma Ltd stock. This gives them a lot of power. So they have a AU$34m stake in this AU$57m business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

With a 16% ownership, the general public have some degree of sway over S66. 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 10%, of the S66 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.

Public Company Ownership

It appears to us that public companies own 13% of S66. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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