Today, I will be analyzing Cleveland BioLabs Inc’s (NASDAQ:CBLI) recent ownership structure, an important but not-so-popular subject among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct CBLI’s shareholder registry. All data provided is as of the most recent financial year end.
Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With a not-so-big institutional ownership of 4.36%, CBLI is not too exposed to price volatility that may arise from institutional trading. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 13.85% ownership in CBLI, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would also examine the rest of its ownership structure in more detail to determine how the company’s major shareholders can affect its investment case.
Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. CBLI insiders hold a significant stake of 58.27% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what CBLI insiders have been doing with their shareholdings 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.
General Public Ownership
A substantial ownership of 23.52% in CBLI 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.
What this means for you:
Are you a shareholder? Although CBLI 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 CBLI’s price volatility in the short-term, considering this group investors may come under pressure to deliver in the short term. A factor to consider is whether CBLI offers enough margin of safety compared to its intrinsic value. Looking for ways to reinforce your current portfolio holdings? Take a look at our free platform for a list of stocks with a strong growth potential.
Are you a potential investor? Ownership structure should not be the only focus of your research when constructing an investment thesis around CBLI. Rather, you should be looking at fundamental drivers like the future growth expectations around CBLI, which is a key factor that will influence CBLI’s share value. Take a look at our most recent infographic report on CBLI for a more in-depth analysis of these factors to help you make a more well-informed investment decision.
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 pass 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.