Could Shanta Gold Limited's (LON:SHG) Investor Composition Influence The Stock Price?




  • In Business
  • 2019-05-23 08:32:23Z
  • By Simply Wall St.
 

The big shareholder groups in Shanta Gold Limited (LON:SHG) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don't tell me what you think, tell me what you have in your portfolio.'

With a market capitalization of UK£49m, Shanta Gold is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about SHG.

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View our latest analysis for Shanta Gold

What Does The Institutional Ownership Tell Us About Shanta Gold?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors own 38% of Shanta Gold. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Shanta Gold, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 19% of Shanta Gold. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Shanta Gold

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Shanta Gold Limited. As individuals, the insiders collectively own UK£2.8m worth of the UK£49m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 37% stake in SHG. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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