Is Seafarms Group Limited’s (ASX:SFG) Shareholder Ownership Skewed Towards Insiders?
The big shareholder groups in Seafarms Group Limited (ASX:SFG) 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 quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
Seafarms Group is not a large company by global standards. It has a market capitalization of AU$140m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Seafarms Group.
See our latest analysis for Seafarms Group
What Does The Institutional Ownership Tell Us About Seafarms Group?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Seafarms Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Seafarms Group’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Seafarms Group. Avatar Industries Pty. Ltd. is currently the largest shareholder, with 23% of shares outstanding. With 11% and 5.9% of the shares outstanding respectively, The Elsie Cameron Foundation, Endowment Arm and Nippon Suisan Kaisha, Ltd. are the second and third largest shareholders. Additionally, the company’s CEO Michael McMahon directly holds 0.8% of the total shares outstanding.
We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of Seafarms Group
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.
We can report that insiders do own shares in Seafarms Group Limited. As individuals, the insiders collectively own AU$7.2m worth of the AU$140m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Seafarms Group. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Company Ownership
We can see that Private Companies own 33%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
It appears to us that public companies own 5.9% of Seafarms Group. We can’t be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
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. Take risks for example – Seafarms Group has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.
If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.
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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
