Dollarama Inc.'s (TSE:DOL) market cap dropped CA$2.3b last week; individual investors who hold 55% were hit as were institutions
Key Insights
Significant control over Dollarama by individual investors implies that the general public has more power to influence management and governance-related decisions
35% of the business is held by the top 25 shareholders
To get a sense of who is truly in control of Dollarama Inc. (TSE:DOL), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 55% 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 6.0% price drop, institutions with their 44% holdings also suffered.
In the chart below, we zoom in on the different ownership groups of Dollarama.
Check out our latest analysis for Dollarama
What Does The Institutional Ownership Tell Us About Dollarama?
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.
Dollarama already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Dollarama, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Dollarama. Caisse de dépôt et placement du Québec is currently the company's largest shareholder with 4.7% of shares outstanding. With 4.5% and 3.9% of the shares outstanding respectively, FMR LLC and The Vanguard Group, Inc. are the second and third largest shareholders. Additionally, the company's CEO Neil Rossy directly holds 0.5% of the total shares outstanding.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Dollarama
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own some shares in Dollarama Inc.. Insiders own CA$535m worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public -- including retail investors -- own 55% of Dollarama. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Dollarama 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.