Could the ownership structure of IPD Group Limited (ASX:IPG) tell us anything useful?

The large groups of shareholders of IPD Group Limited (ASX:IPG) have power over the company. Generally speaking, as a company grows, institutions increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said he likes “a business with enduring competitive advantages that is led by capable, owner-oriented people.” So it’s nice to see some insider ownership, as it may suggest management is owner-driven.

IPD Group is a small company with a market capitalization of A$141 million, so it may still fly under the radar of many institutional investors. Our analysis of company ownership, below, shows that the institutions are visible on the share register. Let’s take a closer look at what different types of shareholders can tell us about IPD Group.

See our latest analysis for IPD Group

distribution of property

What does institutional ownership tell us about IPD Group?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. They therefore generally consider buying larger companies that are included in the relevant benchmark.

As you can see, institutional investors hold a significant share of IPD Group. This implies that analysts working for these institutions have reviewed the stock and like it. But like everyone else, they can be wrong. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see IPD Group’s historic earnings and revenue below, but keep in mind there’s always more to tell.

earnings-and-revenue-growth

earnings-and-revenue-growth

We note that hedge funds have no significant investment in IPD Group. From our data, we deduce that the main shareholder is Mohamed Yoosuff (who also holds the title of CFO) with 13% of the outstanding shares. It’s generally considered a good sign when insiders hold a significant amount of stock in the company, and in that case, we’re happy to see a company insider act as a key stakeholder. In comparison, the second and third shareholders hold around 13% and 8.5% of the shares. Additionally, CEO Michael Sainsbury owns 0.8% of the company’s shares.

We dug a little deeper and found that 7 of the major shareholders make up about 53% of the register, implying that along with the large shareholders, there are a few smaller shareholders, thus balancing everyone’s interests somewhat.

While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. Although there is some analyst coverage, the company is probably not widely covered. So it could attract more attention, on the track.

IPD Group Insider Ownership

The definition of an insider may differ slightly from country to country, but board members still matter. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.

I generally consider insider ownership to be a good thing. However, there are times when it is more difficult for other shareholders to hold the board accountable for decisions.

It appears that insiders hold a significant share of IPD Group Limited. Insiders hold an A$69 million stake in the A$141 million business. We would say this shows alignment with shareholders, but it should be noted that the company is still quite small; some insiders may have founded the company. You can click here to see if these insiders have been buying or selling.

General public property

The general public, including retail investors, owns 27% of the company’s capital and therefore cannot be easily ignored. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.

Private Company Ownership

We can see that private companies hold 11% of the issued shares. It might be worth exploring this further. If related parties, such as insiders, have an interest in any of these private companies, this should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors. Take risks for example – IPD Group has 2 warning signs we think you should know.

But finally it’s the future, not the past, which will determine the performance of the owners of this company. Therefore, we think it’s advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.