Ares Commercial Real Estate Corporation's (NYSE:ACRE) market cap dropped US$50m last week; individual investors who hold 52% were hit as were institutions

editorial-team@simplywallst.com (Simply Wall St)

Thu, Dec 19, 2024, 5:37 AM 4 min read

To get a sense of who is truly in control of Ares Commercial Real Estate Corporation (NYSE:ACRE), it is important to understand the ownership structure of the business. With 52% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 13% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 44% stock also took a hit.

Let's delve deeper into each type of owner of Ares Commercial Real Estate, beginning with the chart below.

See our latest analysis for Ares Commercial Real Estate

ownership-breakdown — NYSE:ACRE Ownership Breakdown December 19th 2024

What Does The Institutional Ownership Tell Us About Ares Commercial Real Estate?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Ares Commercial Real Estate does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Ares Commercial Real Estate's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth — NYSE:ACRE Earnings and Revenue Growth December 19th 2024

Hedge funds don't have many shares in Ares Commercial Real Estate. BlackRock, Inc. is currently the largest shareholder, with 9.3% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 5.5% of common stock, and Invesco Capital Management LLC holds about 4.2% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Ares Commercial Real Estate

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own some shares in Ares Commercial Real Estate Corporation. As individuals, the insiders collectively own US$14m worth of the US$358m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 52% of Ares Commercial Real Estate shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Ares Commercial Real Estate better, we need to consider many other factors. Take risks for example - Ares Commercial Real Estate has 2 warning signs we think you should be aware of.

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.