Today, I will be analyzing Gran Colombia Gold Corp’s (TSE:GCM) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. 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 GCM’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 3.07% puts GCM on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.
I find insiders are an 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. GCM insiders hold a significant stake of 28.77% 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). Another aspect of insider ownership is to learn about their recent transactions. 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 51.09% in GCM 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.
Private Equity Ownership
With an ownership of 15.24%, private equity firms are a major stakeholder in GCM and are in a position to play an important role in shaping up corporate strategy with a focus on value creation. An investor should be encouraged by the ownership of these institutions who are known to be experts in increasing efficiency, improving capital structure and opting for value-accretive policy decisions.
Private Company Ownership
Another group of owners that a potential investor in GCM should consider are private companies, with a stake of 1.83%. 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 GCM’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With a low level of institutional ownership, investors in GCM need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around GCM. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Gran Colombia Gold’s share price. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for GCM’s future growth? Take a look at our free research report of analyst consensus for GCM’s outlook.
- Past Track Record: Has GCM 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 GCM’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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.