I am going to take a deep dive into Rey Resources Limited’s (ASX:REY) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure of a company has been found to affect share performance over time. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct REY’s shareholder registry. All data provided is as of the most recent financial year end.

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Institutional Ownership

Institutions account for 10.26% of REY’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although REY has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of REY, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into REY’s ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. REY insiders hold a significant stake of 31.95% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what REY insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.

General Public Ownership

The general public holds a substantial 11.43% stake in REY, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Another important group of owners for potential investors in REY are private companies that hold a stake of 30.06% in REY. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence REY’s business strategy. Thus, investors should dig deeper into REY’s business relations with these companies and how it can affect shareholder returns in the long-term.