Majority Shareholdings

Hi Ray,

An interesting question and the answer would be it depends.  We would certainly rather a founder/CEO owned 50% of a company as opposed to zero, i.e. we like the decision makers to have skin in the game.  Obviously, lower free float reduces liquidity, and when liquidity is below a certain point, it reduces the size of institutional investor who will consider the stock i.e. why would they bother if they cannot get set in a meaningful holding. An example of this is ReadyTech (RDY), where private equity firm Pemba Capital owns ~30% of the stock, dramatically reducing liquidity, yet they are the not the founder or owner who is driving the business day to day. That in our view is a negative for a stock more so than if the CEO had that size of position.

• Without trying to avoid the question each stock/situation needs to be evaluated on a case-by-case basis, with the size of the businesses, the liquidity of the shares outside the large holding, and who/what entity is holding the shares, the key variables.