In this article, I will take a quick look at Seabridge Gold Inc’s (TSE:SEA) recent ownership structure – an unconventional investing subject, but an important one. The impact of a company’s ownership structure affects both its short- and long-term performance. 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 SEA’s shareholder registry.
With an institutional ownership of 41.75%, SEA can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although SEA has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. Considering hedge funds hold a stake of 8.33% in the company, SEA shares may experience high short-term volatility as this class of institutions are frequently found to sell significantly during market-wide shocks. We should dig deeper into the company’s ownership structure to find how the rest of its ownership structure can impact its investment case.
Insiders form a group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. With a stake of 4.62%, insiders seem to have some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public Ownership
The general public holds a substantial 38.68% stake in SEA, making it a highly popular stock among retail investors. 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 important group of owners for potential investors in SEA are private companies that hold a stake of 6.62% in SEA. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in SEA, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
I suggest investors seek some degree of margin of safety due to high institutional ownership in SEA, in particular due to the strong presence of active hedge fund investors. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around SEA. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Seabridge Gold’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for SEA’s future growth? Take a look at our free research report of analyst consensus for SEA’s outlook.
- Past Track Record: Has SEA 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 SEA’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 email@example.com.