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Every investor in Tera Software Limited (NSE:TERASOFT) should be aware of the most powerful shareholder groups. 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.’
Tera Software is not a large company by global standards. It has a market capitalization of ₹363.5m, 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. Let’s take a closer look to see what the different types of shareholder can tell us about TERASOFT.
Check out our latest analysis for Tera Software
What Does The Lack Of Institutional Ownership Tell Us About Tera Software?
Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.
There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. Alternatively, there might be something about the company that has kept institutional investors away. Tera Software might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.
Hedge funds don’t have many shares in Tera Software. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Tera Software
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that insiders own more than half of Tera Software Limited. This gives them effective control of the company. That means they own ₹196.8m worth of shares in the ₹363.5m company. That’s quite meaningful. 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.