Individual investors account for 54% of Red 5 Limited's (ASX:RED) ownership, while institutions account for 36%

Simply Wall St

Sun, Jul 30, 2023, 7:18 PM 4 min read

Key Insights

Significant control over Red 5 by individual investors implies that the general public has more power to influence management and governance-related decisions
The top 25 shareholders own 45% of the company
Institutions own 36% of Red 5

A look at the shareholders of Red 5 Limited (ASX:RED) can tell us which group is most powerful. The group holding the most number of shares in the company, around 54% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).

And institutions on the other hand have a 36% ownership in the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies.

Let's take a closer look to see what the different types of shareholders can tell us about Red 5.

Check out our latest analysis for Red 5

ownership-breakdown — ASX:RED Ownership Breakdown July 31st 2023

What Does The Institutional Ownership Tell Us About Red 5?

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 Red 5 does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Red 5, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth — ASX:RED Earnings and Revenue Growth July 31st 2023

We note that hedge funds don't have a meaningful investment in Red 5. Franklin Resources, Inc. is currently the largest shareholder, with 9.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.2% and 5.5% of the 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 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 Red 5

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

We can see that insiders own shares in Red 5 Limited. It has a market capitalization of just AU$640m, and insiders have AU$11m worth of shares, in their own names. 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, who are usually individual investors, hold a substantial 54% stake in Red 5, suggesting it is a fairly popular stock. 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.

Private Company Ownership

Our data indicates that Private Companies hold 8.4%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Red 5 that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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