Breaking Down Stratex International Plc’s (LON:STI) Ownership Structure

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Institutional Ownership

Institutions account for 72.24% of STI’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of 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 11.49% stake in the company, its share price can experience heightened volatility. We should dig deeper into the company’s ownership structure to find how the rest of its ownership structure can impact its investment case.

Insider Ownership

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. STI insiders hold a not-so-significant 1.01% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.

Private Equity Ownership

Private equity firms hold a 8.83% stake in STI. With a stake of this size, they can be influential in key policy decisions. An investor should be encouraged by the ownership of these institutions who are known to be experts in increasing efficiency, improving capital structure and opting for value-accretive policy decisions.

Private Company Ownership

Another important group of owners for potential investors in STI are private companies that hold a stake of 4.46% in STI. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence STI’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in STI. This is to 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 STI. Rather, you should be looking at fundamental drivers such as Stratex International’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following: