Today, I will be analyzing Atomera Incorporated’s (NASDAQ:ATOM) recent ownership structure, an important but not-so-popular subject among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. 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 ATOM’s ownership structure in more detail.
Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. ATOM has institutions holding a stake of just 8.7%, which should not be much of a concern in terms of excessive price volatility. But another factor to consider is the presence of hedge funds, who are notorious for active investing. In ATOM’s case, they make up 7.1% of ownership, indicating potential sharp stock price movements during significant transactions. However, I would explore its ownership registry in more detail to check how other ownership types affect its investment case for the long-term investor.
Insiders form a 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. 10.1% ownership of ATOM 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 may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
A substantial ownership of 68.0% in ATOM 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.
Private Company Ownership
Another important group of owners for potential investors in ATOM are private companies that hold a stake of 6.0% in ATOM. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect ATOM’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Although ATOM has a low level of overall institutional ownership, active hedge funds still have a significant stake in the company. Their ownership is a non-fundamental factor, which can impact ATOM’s price volatility in the short-term, considering this group investors may come under pressure to deliver in the short term. An investment in ATOM should come with enough margin of safety in order to avoid significant dips in shareholding value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around ATOM. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Atomera’s share price. I urge you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for ATOM’s future growth? Take a look at our free research report of analyst consensus for ATOM’s outlook.
Financial Health: Are ATOM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.