Today, I will be analyzing Golden Minerals Company’s (AMEX:AUMN) recent ownership structure, an important but not-so-popular subject among individual investors. 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, which is why we’ll take a moment to analyse AUMN’s shareholder registry.
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. A low institutional ownership of 7.68% puts AUMN on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Additionally, the company is covered by only 1 analyst, further highlighting its low popularity.
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. Although individuals in AUMN hold only a 1.45% stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. I will also like to check what insiders have been doing recently with their holdings. 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
A big stake of 43.95% in AUMN 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 Equity Ownership
With an ownership of 45.24%, private equity firms are a major stakeholder in AUMN and are in a position to play an important role in shaping up corporate strategy with a focus on value creation. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.
Private Company Ownership
Potential investors in AUMN should also look at another important group of investors: private companies, with a stake of 1.63%, 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 AUMN’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Institutional ownership in AUMN is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only focus of your research when constructing an investment thesis around AUMN. Instead, you should be evaluating company-specific factors such as Golden Minerals’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is AUMN’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.
- Past Track Record: Has AUMN been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of AUMN’s historicals for more clarity.
- 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 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.