In this article, I will take a quick look at Trinity Place Holdings Inc’s (AMEX:TPHS) 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. 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 TPHS’s shareholder registry. All data provided is as of the most recent financial year end.
TPHS’s 43.74% 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. With hedge funds holding a 25.70% stake in the company, its share price can experience heightened volatility. I am going to further examine TPHS’s ownership structure to check how other major shareholders can affect its investment case.
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. 8.27% 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 substantial ownership of 22.29% in TPHS 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.
What this means for you:
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in TPHS. 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. However, ownership structure should not be the only focus of your research when constructing an investment thesis around TPHS. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Trinity Place Holdings’s share price. I highly recommend 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.