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The big shareholder groups in Optiscan Imaging Limited (ASX:OIL) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.
Optiscan Imaging is not a large company by global standards. It has a market capitalization of AU$134m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Optiscan Imaging.
What Does The Institutional Ownership Tell Us About Optiscan Imaging?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Optiscan Imaging already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Optiscan Imaging, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Optiscan Imaging. The company's largest shareholder is Chandler Corporation, with ownership of 15%. Meanwhile, the second and third largest shareholders, hold 8.1% and 6.2%, of the shares outstanding, respectively.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Optiscan Imaging
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our information suggests that insiders maintain a significant holding in Optiscan Imaging Limited. Insiders have a AU$23m stake in this AU$134m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public -- mostly retail investors -- own 51% of Optiscan Imaging. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies 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 a stake of 15%, private equity firms could influence the Optiscan Imaging board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Private Company Ownership
It seems that Private Companies own 6.4%, of the Optiscan Imaging stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 5 warning signs for Optiscan Imaging you should be aware of, and 1 of them makes us a bit uncomfortable.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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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