If you want to know who really controls Frontier Developments plc (LON:FDEV), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 35% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
So, insiders of Frontier Developments have a lot at stake and every decision they make on the company’s future is important to them from a financial point of view.
Let's take a closer look to see what the different types of shareholders can tell us about Frontier Developments.
What Does The Institutional Ownership Tell Us About Frontier Developments?
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.
Frontier Developments already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Frontier Developments' historic earnings and revenue below, but keep in mind there's always more to the story.
AIM:FDEV Earnings and Revenue Growth September 16th 2024
Our data indicates that hedge funds own 8.6% of Frontier Developments. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Frontier Developments' case, its President, David Braben, is the largest shareholder, holding 33% of shares outstanding. With 8.8% and 8.6% of the shares outstanding respectively, Tencent Holdings Limited and Working Capital Advisors (UK) Limited are the second and third largest shareholders.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.
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 Frontier Developments
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.
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 most recent data indicates that insiders own a reasonable proportion of Frontier Developments plc. Insiders own UK£33m worth of shares in the UK£95m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. 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
We can see that public companies hold 8.9% of the Frontier Developments shares on issue. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Frontier Developments , and understanding them should be part of your investment process.
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.
