In this analysis, my focus will be on developing a perspective on Primorus Investments plc’s (AIM:PRIM) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, I will take a look at PRIM’s shareholders in more detail.
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 1.97% puts PRIM on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like PRIM used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
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. PRIM insiders hold a not-so-significant 4.48% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. 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
A big stake of 93.55% in PRIM is held by the general public. 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.
With a low level of institutional ownership, investors in PRIM need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. Institutional ownership level and composition in PRIM is not high nor active enough to significantly impact its investment thesis. 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 Primorus Investments to see PRIM’s fundamentals and whether it could be considered an undervalued opportunity.
PS. If you are not interested in Primorus Investments 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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