Significant insider control over AFT Pharmaceuticals implies vested interests in company growth
70% of the company is held by a single shareholder (Hartley Atkinson)
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls AFT Pharmaceuticals Limited (NZSE:AFT), then you'll have to look at the makeup of its share registry. With 70% stake, individual insiders possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
With such a notable stake in the company, insiders would be highly incentivised to make value accretive decisions.
In the chart below, we zoom in on the different ownership groups of AFT Pharmaceuticals.
What Does The Institutional Ownership Tell Us About AFT Pharmaceuticals?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
AFT Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AFT Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.
NZSE:AFT Earnings and Revenue Growth May 20th 2023
AFT Pharmaceuticals is not owned by hedge funds. The company's CEO Hartley Atkinson is the largest shareholder with 70% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Meanwhile, the second and third largest shareholders, hold 4.6% and 3.4%, of the shares outstanding, respectively.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of AFT Pharmaceuticals
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that insiders own more than half of AFT Pharmaceuticals Limited. This gives them effective control of the company. That means they own NZ$258m worth of shares in the NZ$367m company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AFT Pharmaceuticals. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Company Ownership
We can see that Private Companies own 3.4%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for AFT Pharmaceuticals you should be aware of.
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.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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