To get a sense of who is truly in control of Harmony Gold Mining Company Limited (JSE:HAR), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 64% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
And things are looking up for institutional investors after the company gained R4.9b in market cap last week. One-year return to shareholders is currently 46% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Harmony Gold Mining.
What Does The Institutional Ownership Tell Us About Harmony Gold Mining?
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 Harmony Gold Mining 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 Harmony Gold Mining's historic earnings and revenue below, but keep in mind there's always more to the story.
JSE:HAR Earnings and Revenue Growth May 4th 2023
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 5.0% of Harmony Gold Mining shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. African Rainbow Minerals Limited is currently the largest shareholder, with 12% of shares outstanding. With 10% and 9.5% of the shares outstanding respectively, Public Investment Corporation Limited and Van Eck Associates Corporation are the second and third largest shareholders.
On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Harmony Gold Mining
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.
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 information suggests that Harmony Gold Mining Company Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around R103m worth of shares (at current prices). 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
The general public, who are usually individual investors, hold a 19% stake in Harmony Gold Mining. 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.
Public Company Ownership
Public companies currently own 12% of Harmony Gold Mining stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Harmony Gold Mining better, we need to consider many other factors. For instance, we've identified 2 warning signs for Harmony Gold Mining that you should be aware of.
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.
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