I am going to take a deep dive into Shree Minerals Limited’s (ASX:SHH) 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. 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 XYZ’s shareholder registry. All data provided is as of the most recent financial year end.

View our latest analysis for Shree Minerals

Institutional Ownership

With an institutional ownership of 12.21%, SHH can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of 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. For SHH shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into SHH’s ownership type to find out how it can affect the company’s investment profile.

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. Although individuals in SHH hold only a 3.20% stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.

General Public Ownership

The general public holds 6.48% stake in SHH, thus, representing an important class of owners. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies if it aligns with other large shareholders.

Private Equity Ownership

With an ownership of 60.70%, private equity firms are a major stakeholder in SHH and are in a position to play an important role in shaping up corporate strategy with a focus on value creation. An investor should be encouraged by the ownership of these institutions who are known to be experts in increasing efficiency, improving capital structure and opting for value-accretive policy decisions.

Private Company Ownership

Another important group of owners for potential investors in SHH are private companies that hold a stake of 12.13% in SHH. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence SHH’s business strategy. Thus, investors should dig deeper into SHH’s business relations with these companies and how it can affect shareholder returns in the long-term.

What this means for you:

Are you a shareholder? The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. If you’re interested in bolstering your portfolio with new stocks and are looking for ideas, take a look at our free app to see my list of stocks with a strong growth potential.

Are you a potential investor? Ownership structure should not be the only focus of your research when constructing an investment thesis around SHH. Rather, you should be looking at fundamental drivers like the future growth expectations around SHH, which is a key factor that will influence SHH’s share value. Take a look at our most recent infographic report on SHH for a more in-depth analysis of these factors to help you make a more well-informed investment decision.

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.