I am going to take a deep dive into First Capital Sp.A.’s (BIT:FIC) most recent ownership structure, not a frequent subject of discussion among individual investors. 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 FIC’s shareholder registry.
FIC’s 22.13% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For shareholders in FIC, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into FIC’s ownership structure to find how the remaining owner types can affect its investment profile.
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. FIC insiders are also influential stakeholders with 6.49% ownership in the company. 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
The general public holds a substantial 43.92% stake in FIC, making it a highly popular stock among retail investors. 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 important group of owners for potential investors in FIC are private companies that hold a stake of 27.47% in FIC. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence FIC’s business strategy. Thus, investors should dig deeper into FIC’s business relations with these companies and how it can affect shareholder returns in the long-term.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for FIC, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as First Capital’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is FIC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has FIC 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 FIC’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 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.