In This Article:
In this analysis, my focus will be on developing a perspective on Lansdowne Oil & Gas plc’s (AIM:LOGP) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at LOGP’s shareholder registry.
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Institutional Ownership
In LOGP’s case, institutional ownership stands at 65.43%, significant enough to cause considerable price moves in the case of large institutional transactions, especially 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. Hedge funds, considered active investors, hold a 27.08% stake in the company, which may be the cause of high short-term volatility in the stock price. But I also examine other ownership types and their potential impact on LOGP’s investment case.
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. A major group of owners of LOGP is individual insiders, sitting with a hefty 10.51% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
Next Steps:
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in LOGP. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for LOGP. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Lansdowne Oil & Gas’s share price. I highly recommend you to complete your research by taking a look at the following: