Today, I will be analyzing Reinhold Europe AB (publ)’s (WSE:RHD) recent ownership structure, an important but not-so-popular subject among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. 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 RHD’s shareholder registry.

View our latest analysis for Reinhold Europe

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. RHD hardly has any institutional ownership, leaving investors little to think about sharp price volatility in the stock that could take place due to institutional trading.

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 RHD is individual insiders, sitting with a hefty 22.08% 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). Another aspect of insider ownership is to learn about their recent transactions. 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

The general public holds a substantial 76.48% stake in RHD, making it a highly popular stock among retail investors. 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 RHD should also look at another important group of investors: private companies, with a stake of 0.76%, 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 RHD’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.