Is Ecofibre Limited's (ASX:EOF) Shareholder Ownership Skewed Towards Insiders?
The big shareholder groups in Ecofibre Limited (ASX:EOF) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
Ecofibre is not a large company by global standards. It has a market capitalization of AU$624m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased much of the company. Let's take a closer look to see what the different types of shareholders can tell us about Ecofibre.
View our latest analysis for Ecofibre
What Does The Institutional Ownership Tell Us About Ecofibre?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Since institutions own only a small portion of Ecofibre, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.
We note that hedge funds don't have a meaningful investment in Ecofibre. Barry Lambert is currently the largest shareholder, with 22% of shares outstanding. In comparison, the second and third largest shareholders hold about 16% and 9.5% of the stock. In addition, we found that Eric Wang, the CEO has 4.1% of the shares allocated to their name.
To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Ecofibre
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
It seems that insiders own more than half the Ecofibre Limited stock. This gives them a lot of power. So they have a AU$355m stake in this AU$624m business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 34% stake in Ecofibre. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Company Ownership
Our data indicates that Private Companies hold 5.5%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Ecofibre better, we need to consider many other factors. For instance, we've identified 3 warning signs for Ecofibre (1 can't be ignored) that you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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