In this article, I’m going to take a look at Chongherr Investments Ltd’s (ASX:CDH) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. 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 CDH’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. CDH insiders hold a significant stake of 37.52% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings 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
With 3.74% ownership, the general public are a relatively smaller ownership class in CDH. This size of ownership may not be enough to sway a policy decision in their favour, but they can still make a collective impact on company policies if it aligns with other large shareholders.
Private Company Ownership
Potential investors in CDH should also look at another important group of investors: private companies, with a stake of 58.74%, who are primarily invested because of strategic and capital gain interests. An ownership of this size indicates a strong financial backing and has the potential to influence CDH’s business strategy. Thus, investors should dig deeper into CDH’s business relations with these companies and how it can affect shareholder returns in the long-term.
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, if you are building an investment case for CDH, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as Chongherr Investments’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following: