Why Anglesey Mining plc’s (LON:AYM) Ownership Structure Is Important

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Institutional Ownership

In AYM’s case, institutional ownership stands at 53.89%, 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. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. For shareholders in AYM, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into AYM’s ownership structure to find how the remaining owner types can affect its investment profile.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. With a minor stake in AYM, 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. 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 10.89% in AYM is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Potential investors in AYM should also look at another important group of investors: private companies, with a stake of 35.05%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect AYM’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

What this means for you:

AYM’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for AYM. Instead, you should be evaluating company-specific factors such as Anglesey Mining’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following: