In this analysis, my focus will be on developing a perspective on Inseego Corp’s (NASDAQ:INSG) latest ownership structure, a less discussed, but important factor. The impact of a company’s ownership structure affects both its short- and long-term performance. 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 INSG’s shareholder registry. All data provided is as of the most recent financial year end.
With an institutional ownership of 28.13%, INSG 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 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 INSG shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into INSG’s ownership type to find out how it can affect the company’s investment profile.
Insiders form another 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. 6.58% 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. I will also like to check what insiders have been doing recently with their holdings. insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
A big stake of 45.60% in INSG 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.
Public Company Ownership
Another group of owners that a potential investor in INSG should consider are other public companies, with a stake of 19.69%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence INSG’s business strategy. Thus, investors should dig deeper into INSG’s business relations with these companies and how it can affect shareholder returns in the long-term.
What this means for you:
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, ownership structure should not be the only focus of your research when constructing an investment thesis around INSG. Rather, you should be examining fundamental factors such as Inseego’s past track record and financial health. I urge you to complete your research by taking a look at the following:
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.