I am going to take a deep dive into Black Mountain Resources Limited’s (ASX:BMZ) most recent ownership structure, not a frequent subject of discussion among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. 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 BMZ’s shareholder registry. All data provided is as of the most recent financial year end.

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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. Generally, an institutional ownership of 8.92%, in the case of BMZ, should not concern investors in terms of high stock volatility. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 17.49% ownership in BMZ, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would also examine the rest of its ownership structure in more detail to determine how the company’s major shareholders can affect its investment case.

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. A major group of owners of BMZ is individual insiders, sitting with a hefty 14.82% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.

General Public Ownership

A substantial ownership of 32.61% in BMZ 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.