In this article, I will take a quick look at Mako Gold Limited’s (ASX:MKG) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. 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 MKG’s shareholder registry.
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Institutional Ownership
Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. With hardly any institutional ownership, MKG stock poses limited concern relating to the effect institutional block trades have on its stock price.
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. MKG insiders hold a significant stake of 27.41% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public Ownership
A substantial ownership of 43.17% in MKG 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 group of owners that a potential investor in MKG should consider are private companies, with a stake of 12.76%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect MKG’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.