Today, I will be analyzing Ferrum Crescent Limited’s (ASX:FCR) recent ownership structure, an important but not-so-popular subject among individual investors. 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 FCR’s shareholder registry.

See our latest analysis for Ferrum Crescent

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. A low institutional ownership of 8.72% puts FCR 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. 8.78% ownership makes insiders an important shareholder group. This level of ownership indicates closely aligned interests of shareholders and management. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.

General Public Ownership

A big stake of 79.60% in FCR 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

Potential investors in FCR should also look at another important group of investors: private companies, with a stake of 2.90%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence FCR’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

Institutional ownership in FCR is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only focus of your research when constructing an investment thesis around FCR. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Ferrum Crescent’s share price. I urge you to complete your research by taking a look at the following: