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Is 4DMedical Limited's (ASX:4DX) Shareholder Ownership Skewed Towards Insiders?

·4-min read

The big shareholder groups in 4DMedical Limited (ASX:4DX) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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.

4DMedical is a smaller company with a market capitalization of AU$350m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about 4DMedical.

See our latest analysis for 4DMedical

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About 4DMedical?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that 4DMedical does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of 4DMedical, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in 4DMedical. Velocimetry Consulting Pty Ltd is currently the largest shareholder, with 22% of shares outstanding. With 6.8% and 2.1% of the shares outstanding respectively, Perennial Value Management Limited and Ryder Investment Management Pty Limited are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of 4DMedical

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can report that insiders do own shares in 4DMedical Limited. In their own names, insiders own AU$24m worth of stock in the AU$350m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 57% stake in 4DMedical, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

We can see that Private Companies own 25%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand 4DMedical better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for 4DMedical (of which 1 makes us a bit uncomfortable!) you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.