In this article, I will take a quick look at Tavistock Investments PLC’s (AIM:TAVI) recent ownership structure – an unconventional investing subject, but an important one. A company’s ownership structure is often linked to its share performance in both the long- and short-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine TAVI’s ownership structure in more detail.
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TAVI’s 32.60% 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. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. In the case of TAVI, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into TAVI’s ownership structure and find out how other key ownership classes can affect its investment profile.
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. 48.66% ownership of TAVI insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It’s also interesting to learn what TAVI 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 18.17% stake in TAVI, 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
Potential investors in TAVI should also look at another important group of investors: private companies, with a stake of 0.57%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TAVI’s business strategy. Thus, investors not need to worry too much about the consequences of these holdings.
TAVI has a significant level of institutional ownership, which often causes long bull and bear trends if the perceived value of the stock changes for these big-ticket investors. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. 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 Tavistock Investments to see TAVI’s fundamentals and whether it could be considered an undervalued opportunity.
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