In this article, I will take a quick look at BLIS Technologies Limited’s (NZSE:BLT) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, it is beneficial for us to examine BLT’s ownership structure in more detail.
In BLT’s case, institutional ownership stands at 17.42%, 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. Although BLT has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For BLT 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 BLT’s ownership type to find out how it can affect the company’s investment profile.
I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. One of the major owners in BLT are individual insiders, sitting with a hefty 30.58% 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’s also interesting to learn what BLT insiders have been doing with their shareholdings 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
The general public holds a substantial 46.59% stake in BLT, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company Ownership
Another group of owners that a potential investor in BLT should consider are private companies, with a stake of 5.41%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect BLT’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
BLT’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, other important factors we must never forget to assess are the fundamentals. I recommend you take a look at our latest free analysis report on BLIS Technologies to see BLT’s fundamentals and whether it could be considered an undervalued opportunity.
PS. If you are not interested in BLIS Technologies anymore, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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