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Are The Major Shareholders Of Alexium International Group Limited (ASX:AJX)?

Raj Burman August 15, 2017
In this analysis, my focus will be on developing a perspective on Alexium International Group Limited’s (ASX:AJX) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at AJX’s shareholders in more detail.
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ASX:AJX Ownership_summary Aug 15th 17
Institutional Ownership

Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 3.88%, AJX doesn’t seem too exposed to higher volatility resulting from institutional trading. Less covered stocks like AJX used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
Insider Ownership

Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. One of the major owners in AJX are individual insiders, sitting with a hefty 18.69% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
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ASX:AJX Insider_trading Aug 15th 17
General Public Ownership

The general public holds a substantial 71.19% stake in AJX, making it a highly popular stock among retail investors. 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

Another important group of owners for potential investors in AJX are private companies that hold a stake of 6.24% in AJX. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in AJX, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
Conclusion

With a low level of institutional ownership, investors in AJX need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. Institutional ownership level and composition in AJX is not high nor active enough to significantly impact its investment thesis. However, other important factors we must never forget to assess are the fundamentals. I recommend you take a look at our latest free analysis report on Alexium International Group to see AJX’s fundamentals and whether it could be considered an undervalued opportunity.