In This Article:
I am going to take a deep dive into Electrum Special Acquisition Corporation’s (NASDAQ:ELEC) most recent ownership structure, not a frequent subject of discussion 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 ELEC’s shareholder registry.
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Institutional Ownership
ELEC’s 61.30% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. With hedge funds holding a 135.83% stake in the company, its share price can experience heightened volatility. I am going to further examine ELEC’s ownership structure to check how other major shareholders can affect its investment case.
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. With 7.04% ownership, ELEC insiders is an important ownership type. This level of ownership indicates closely aligned interests of shareholders and management. It may be interesting to see what insiders have been doing with their shares lately. Insiders buying shares can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial needs.
Private Company Ownership
Potential investors in ELEC should also look at another important group of investors: private companies, with a stake of 70.31%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect ELEC’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Next Steps:
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in ELEC. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for ELEC, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Electrum Special Acquisition’s share price. I highly recommend you to complete your research by taking a look at the following: