In this analysis, my focus will be on developing a perspective on Smart Marine Systems Limited’s (ASX:SM8) latest ownership structure, a less discussed, but important factor. 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 SM8’s shareholder registry.

Check out our latest analysis for Smart Marine Systems

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. SM8 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 SM8 is individual insiders, sitting with a hefty 37.73% 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’s also interesting to learn what SM8 insiders have been doing with their shareholdings 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 big stake of 48.88% in SM8 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 SM8 should consider are private companies, with a stake of 12.86%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect SM8’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

Next Steps:

Institutional ownership in SM8 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, if you are building an investment case for SM8, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Smart Marine Systems’s share price. I urge you to complete your research by taking a look at the following:

1. Financial Health: Is SM8’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

2. Past Track Record: Has SM8 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of SM8’s historicals for more clarity.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.