Australia Markets open in 6 hrs 29 mins

Could Magnetite Mines Limited’s (ASX:MGT) Investor Composition Influence The Stock Price?

Ricardo Landis

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

If you want to know who really controls Magnetite Mines Limited (ASX:MGT), then you’ll have to look at the makeup of its share registry. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.’

With a market capitalization of AU$3.0m, Magnetite Mines is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased much of the company. Let’s delve deeper into each type of owner, to discover more about MGT.

Check out our latest analysis for Magnetite Mines

ASX:MGT Ownership Summary, February 20th 2019

What Does The Institutional Ownership Tell Us About Magnetite Mines?

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.

Since institutions own under 5% of Magnetite Mines, many may not have spent much time considering the stock. But it’s clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

ASX:MGT Income Statement, February 20th 2019

We note that hedge funds don’t have a meaningful investment in Magnetite Mines. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Magnetite Mines

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of Magnetite Mines Limited. It has a market capitalization of just AU$3.0m, and insiders have AU$735k worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public — mostly retail investors — own 62% of Magnetite Mines . With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies 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

We can see that Private Companies own 8.4%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.