In This Article:
In this analysis, my focus will be on developing a perspective on Ding He Mining Holdings Limited’s (SEHK:705) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse 705’s shareholder registry.
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Institutional Ownership
Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With an institutional ownership of 7.31%, 705 doesn’t seem too exposed to higher volatility resulting from institutional trading.
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. 7.77% ownership makes insiders an important shareholder group. This level of ownership indicates closely aligned interests of shareholders and management. I will also like to check what insiders have been doing recently with their holdings. insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
A substantial ownership of 84.92% in 705 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.
Next Steps:
Institutional ownership level and composition in 705 is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for 705, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as Ding He Mining Holdings’s past track record and financial health. I urge you to complete your research by taking a look at the following: