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The big shareholder groups in Dropsuite Limited (ASX:DSE) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. 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.
Dropsuite is a smaller company with a market capitalization of AU$147m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are not on the share registry. We can zoom in on the different ownership groups, to learn more about Dropsuite.
What Does The Lack Of Institutional Ownership Tell Us About Dropsuite?
We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.
There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Dropsuite, for yourself, below.
It looks like hedge funds own 21% of Dropsuite shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Topline Capital Partners, LLC is the largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.5% and 4.9%, of the shares outstanding, respectively. Charif El-Ansari, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.
On studying our ownership data, we found that 18 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of Dropsuite
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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.
Our most recent data indicates that insiders own a reasonable proportion of Dropsuite Limited. Insiders own AU$31m worth of shares in the AU$147m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a substantial 56% stake in Dropsuite, suggesting it is a fairly popular stock. With this amount 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 vote on acquisitions or mergers that may not improve profitability.
It's always worth thinking about the different groups who own shares in a company. But to understand Dropsuite better, we need to consider many other factors. For instance, we've identified 1 warning sign for Dropsuite that you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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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.