Bid Corporation Limited (JSE:BID) is favoured by institutional owners who hold 61% of the company

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

Thu, Nov 23, 2023, 11:19 PM 4 min read

Key Insights

Given the large stake in the stock by institutions, Bid's stock price might be vulnerable to their trading decisions
51% of the business is held by the top 5 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Bid Corporation Limited (JSE:BID) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 61% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's take a closer look to see what the different types of shareholders can tell us about Bid.

Check out our latest analysis for Bid

ownership-breakdown — JSE:BID Ownership Breakdown November 24th 2023

What Does The Institutional Ownership Tell Us About Bid?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Bid. 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 Bid's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — JSE:BID Earnings and Revenue Growth November 24th 2023

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Bid is not owned by hedge funds. Our data shows that Public Investment Corporation Limited is the largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.2% and 9.1% of the stock.

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 considerable sway over the company's decision-making.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Bid

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Bid Corporation Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own R332m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Bid. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.