Cogstate Limited’s (ASX:CGS) share price fell 11% last week; individual investors would not be happy

If you want to know who actually controls Cogstate Limited (ASX:CGS), then you’ll need to look at the composition of its share ledger. We can see that individual investors hold the lion’s share of the company with 36% ownership. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

While insiders who hold 35% have been under pressure after the market capitalization fell to A$316 million last week, individual investors suffered the most losses.

In the table below, we zoom in on Cogstate’s different property groups.

Check opportunities and risks within the AU healthcare services industry.

ASX: CGS Ownership Breakdown October 24, 2022

What does institutional ownership tell us about Cogstate?

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.

Cogstate already has institutions on the stock register. Indeed, they hold a respectable stake in the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see Cogstate’s revenue and historical earnings below, but keep in mind there’s always more to tell.

ASX: CGS Earnings and Revenue Growth October 24, 2022

We note that hedge funds have no significant investment in Cogstate. Our data shows that David Dolby is the largest shareholder with 14% of the shares outstanding. Martyn Myer is the second largest shareholder with 14% of ordinary shares and Australian Ethical Investment Ltd. owns approximately 12% of the company’s shares. Additionally, we found that Bradley O’Connor, the CEO, owns 2.5% of the shares awarded in his name.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company, which implies that this group has a considerable influence on the decision-making of the company.

Institutional ownership research is a good way to assess and filter the expected performance of a stock. The same can be obtained by studying the feelings of the analyst. There are plenty of analysts covering the stock, so it might be interesting to see what they are predicting as well.

Cogstate Insider Ownership

The definition of company insiders can be subjective and varies from jurisdiction to jurisdiction. Our data reflects individual insiders, capturing at least board members. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.

Most view insider ownership as a positive because it can indicate that the board is well aligned with other shareholders. However, there are times when too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Cogstate Limited. It has a market capitalization of just A$316 million and insiders hold A$109 million worth of shares in their own names. We would say this shows alignment with shareholders, but it should be noted that the company is still quite small; some insiders may have founded the company. You can click here to see if these insiders have been buying or selling.

General public property

With a 36% stake, the general public, made up mostly of individual investors, has some influence over Cogstate. Although this group may not necessarily make the decisions, they can certainly have a real influence on the way the business is run.

Ownership of a public company

It appears to us that public companies hold 6.8% of Cogstate. It may be a strategic interest and both companies may have related business interests. They may have separated. This exploitation probably deserves further investigation.

Next steps:

I find it very interesting to see who exactly owns a company. But to really get insight, we also need to consider other information. To this end, you should be aware of the 1 warning sign we spotted with Cogstate.

But finally it’s the future, not the past, which will determine the performance of the owners of this company. Therefore, we think it’s advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.

Valuation is complex, but we help make it simple.

Find out if cog state is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

See the free analysis

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Karen J. Nelson