Shareholder diversity may explain Apple’s stock price
Elon Musk who alone owns around 13% of Tesla’s equity (source: Nasdaq), Apple’s insiders hold only 0.07% of its pie (source: Yahoo Finance), so Apple’s ownership is less concentrated. This also means Apple’s senior managers have less of an incentive to make decisions in their own interest, making the company better disposed to shareholder-value maximization. Shareholder diversity helps align decision-making with the interests of all shareholders, which could also explain why its shares are highly valued.
Additionally, according to Yahoo Finance, Apple’s institutional shareholding stands at 61.32%, which is much higher than Tesla’s 44.21%. Institutional investors typically exert significant influence on board level decision-making. In theory, their power being relatively high at Apple therefore serves to ensure that shareholder interests are in that much better alignment with its organizational objectives, which in turn results in superior outcomes.
A valuation insight: As an associate at Deutsche Bank’s trading desk, I learnt the pithy trading rule: “Buy underpriced stocks, sell overpriced stocks." Given that Apple is overpriced, it should be sold. Yet, even some short-term investors are holding on to their positions, thus resulting in its sustained overvaluation. Why? Is it related to shareholder diversity? You guessed right.
When multifarious investors (retail, mutual funds and others) come together, there is considerable market dynamism. This arises because these investors as a class have widely varying perceptions of the safety of the stock in question and the returns to be obtained from it, resulting in diverse expectations of future price movements. This is the case with Apple in my observation.
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