With a 46% stake, Absolute Software Corporation (TSE:ABST) seems to have captured institutional investors’ interest

With a 46% stake, Absolute Software Corporation (TSE:ABST) seems to have captured institutional investors’ interest

Key Insights

  • Institutions’ substantial holdings in Absolute Software implies that they have significant influence over the company’s share price

  • A total of 14 investors have a majority stake in the company with 51% ownership

  • Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Absolute Software Corporation (TSE:ABST) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

In the chart below, we zoom in on the different ownership groups of Absolute Software.

Check out our latest analysis for Absolute Software

ownership-breakdown

ownership-breakdown

What Does The Institutional Ownership Tell Us About Absolute Software?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Absolute Software already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out a stock at the same time. So it is worth checking the past earnings trajectory of Absolute Software, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth

earnings-and-revenue-growth

Our data indicates that hedge funds own 22% of Absolute Software. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Lynrock Lake LP with 11% of outstanding shares. Meanwhile, the second and third largest shareholders, hold 10% and 6.5%, of the outstanding shares, respectively. Additionally, the company’s CEO Christy Wyatt directly holds 0.7% of the total outstanding shares.

A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Absolute Software

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are the founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in Absolute Software Corporation. It has a market capitalization of just CA$803m, and insiders have CA$11m worth of shares, in their own names. It’s 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– including retail investors — own 31% stake in the company, and hence can’t easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We’ve spotted 4 warning signs for Absolute Software you should be aware of, and 2 of them don’t sit too well with us.

If you would prefer to discover what analysts are predicting in terms of future growth, don’t 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.

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