In this article, I’m going to take a look at Burcon Nutrascience Corporation’s (TSX:BU) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at XYZ’s shareholder registry. All data provided is as of the most recent financial year end.
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 2.82% puts BU on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like BU used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more 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. 9.40% ownership makes insiders an important shareholder group. An insider stake of this level indicates that executives are highly aligned with the shareholders as both stand to gain when the value of the company rises. It may be interesting to see what insiders have been doing with their shares lately. Insiders buying shares can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial needs.
General Public Ownership
A substantial ownership of 62.10% in BU is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company Ownership
Another group of owners that a potential investor in BU should consider are private companies, with a stake of 4.82%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence BU’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
What this means for you:
Are you a shareholder? Institutional ownership level and composition in BU is not high nor active enough to significantly impact its investment thesis. If you’re looking to diversify your holdings with high-quality stocks, our free analysis platform has a selection of high-quality stocks with a strong growth potential.
Are you a potential investor? Ownership structure should not be the only determining factor when you’re building an investment thesis for BU. Rather, you should be looking at fundamental drivers like the future growth expectations around BU, which is a key factor that will influence BU’s share value. Take a look at our most recent infographic report on BU 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.