Northern Technologies International Corporation's (NASDAQ:NTIC) market cap dropped US$24m last week; individual investors who hold 48% were hit as were institutions
Key Insights
Significant control over Northern Technologies International by individual investors implies that the general public has more power to influence management and governance-related decisions
The top 24 shareholders own 50% of the company
To get a sense of who is truly in control of Northern Technologies International Corporation (NASDAQ:NTIC), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 48% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
While the holdings of individual investors took a hit after last week’s 15% price drop, institutions with their 35% holdings also suffered.
Let's take a closer look to see what the different types of shareholders can tell us about Northern Technologies International.
See our latest analysis for Northern Technologies International
What Does The Institutional Ownership Tell Us About Northern Technologies International?
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.
Northern Technologies International 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Northern Technologies International's historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Northern Technologies International. Looking at our data, we can see that the largest shareholder is Inter Alia Holding Company with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.2% and 4.6%, of the shares outstanding, respectively. In addition, we found that G. Lynch, the CEO has 1.1% of the shares allocated to their name.
After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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. 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 Northern Technologies International
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 a 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 report that insiders do own shares in Northern Technologies International Corporation. In their own names, insiders own US$6.8m worth of stock in the US$148m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 48% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Northern Technologies International. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Company Ownership
We can see that Private Companies own 13%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Northern Technologies International you should know about.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com