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Who Are The Major Shareholders Of Sumatra Copper & Gold plc (ASX:SUM)?

Today, I will be analyzing Sumatra Copper & Gold plc’s (ASX:SUM) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse XYZ’s shareholder registry. All data provided is as of the most recent financial year end.

Check out our latest analysis for Sumatra Copper & Gold

ASX:SUM Ownership Summary Nov 15th 17
ASX:SUM Ownership Summary Nov 15th 17

Institutional Ownership

In SUM’s case, institutional ownership stands at 11.10%, significant enough to cause considerable price moves in the case of large institutional transactions, especially 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. With hedge funds holding a 9.42% stake in the company, its share price can experience heightened volatility. I am going to further examine SUM’s ownership structure to check how other major shareholders can affect its investment case.

Insider Ownership

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. With a stake of 3.24%, 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. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.

General Public Ownership

A big stake of 26.59% in SUM 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 Equity Ownership

With an ownership of 13.05%, private equity firms are a major stakeholder in SUM and are in a position to play an important role in shaping up corporate strategy with a focus on value creation. This is an encouraging sign for investors as these investors tend to be active strategist in companies, focusing on increasing operational and capital efficiency for the firm.

Private Company Ownership

Another group of owners that a potential investor in SUM should consider are private companies, with a stake of 36.60%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in SUM, 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.

What this means for you:

Are you a shareholder? I suggest investors seek some degree of margin of safety due to high institutional ownership in SUM, in particular due to the strong presence of active hedge fund investors. This may enable shareholders to comfortably invest in the company and avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. 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 focus of your research when constructing an investment thesis around SUM. Rather, you should be examining fundamental factors like the intrinsic valuation of SUM, which is a key driver of SUM’s share price. Take a look at our most recent infographic report on SUM 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.

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