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To get a sense of who is truly in control of REA Group Limited (ASX:REA), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 61% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, public companies collectively scored the highest last week as the company hit AU$16b market cap following a 4.3% gain in the stock.
In the chart below, we zoom in on the different ownership groups of REA Group.
Check out our latest analysis for REA Group
What Does The Institutional Ownership Tell Us About REA Group?
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.
As you can see, institutional investors have a fair amount of stake in REA Group. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at REA Group's earnings history below. Of course, the future is what really matters.
We note that hedge funds don't have a meaningful investment in REA Group. News Corporation is currently the largest shareholder, with 61% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 1.9% of the shares outstanding, followed by an ownership of 1.2% by the third-largest shareholder.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of REA Group
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.