Institutions own 26% of Red 5 Limited (ASX:RED) shares but individual investors control 52% of the company
Simply Wall St
4 min read
A look at the shareholders of Red 5 Limited (ASX:RED) can tell us which group is most powerful. We can see that individual investors own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Meanwhile, institutions make up 26% of the company’s shareholders. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies.
Let's delve deeper into each type of owner of Red 5, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Red 5?
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.
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.
ASX:RED Earnings and Revenue Growth February 20th 2023
It would appear that 5.5% of Red 5 shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Franklin Resources, Inc. is currently the company's largest shareholder with 9.2% of shares outstanding. With 7.4% and 5.5% of the shares outstanding respectively, VBS Exchange Pty. Ltd. and Regal Partners Limited are the second and third largest shareholders. Furthermore, CEO Mark Williams is the owner of 0.6% of the company's shares.
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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Red 5
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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.
Shareholders would probably be interested to learn that insiders own shares in Red 5 Limited. In their own names, insiders own AU$10m worth of stock in the AU$489m company. 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, mostly comprising of individual investors, collectively holds 52% of Red 5 shares. 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
We can see that Private Companies own 14%, of the shares on issue. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Red 5 better, we need to consider many other factors. For instance, we've identified 3 warning signs for Red 5 (1 is significant) that you should be aware of.
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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