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Today, I will be analyzing BCI Group Holdings Limited’s (SEHK:8412) 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 8412’s shareholder registry.
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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. 46.44% ownership of 8412 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’s also interesting to learn what 8412 insiders have been doing with their shareholdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
The general public holds a substantial 33.66% stake in 8412, 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.
Public Company Ownership
Another important group of owners for potential investors in 8412 are other public companies that hold a stake of 19.90% in 8412. These are the companies that are mainly invested due to their strategic interests or incentivized by reaping capital gains on investments. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect 8412’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Next Steps:
A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, ownership structure should not be the only determining factor when you’re building an investment thesis for 8412. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of BCI Group Holdings’s share price. I highly recommend you to complete your research by taking a look at the following: