In This Article:
Today, I will be analyzing Petratherm Limited’s (ASX:PTR) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct PTR’s shareholder registry.
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Institutional Ownership
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 4.72% puts PTR on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.
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. 16.63% ownership of PTR insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). 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 64.64% in PTR 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 PTR should consider are private companies, with a stake of 14.01%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in PTR, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.