Given the large stake in the stock by institutions, G8 Education's stock price might be vulnerable to their trading decisions
52% 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
To get a sense of who is truly in control of G8 Education Limited (ASX:GEM), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 74% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's take a closer look to see what the different types of shareholders can tell us about G8 Education.
What Does The Institutional Ownership Tell Us About G8 Education?
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.
We can see that G8 Education 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. 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 G8 Education's historic earnings and revenue below, but keep in mind there's always more to the story.
ASX:GEM Earnings and Revenue Growth June 21st 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. G8 Education is not owned by hedge funds. Orbis Investment Management Limited is currently the largest shareholder, with 16% of shares outstanding. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 8.7% by the third-largest shareholder.
Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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 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 G8 Education
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of G8 Education Limited in their own names. It seems the board members have no more than AU$2.9m worth of shares in the AU$967m company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over G8 Education. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for G8 Education that you should be aware of before investing here.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport on analyst forecasts.
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.
