Are Institutions Heavily Invested In Arena REIT’s (ASX:ARF) Shares?

The big shareholder groups in Arena REIT (ASX:ARF) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of AU$950m, Arena REIT is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about Arena REIT.

Check out our latest analysis for Arena REIT

ownership-breakdown
ASX:ARF Ownership Breakdown September 16th 2020

What Does The Institutional Ownership Tell Us About Arena REIT?

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.

Arena REIT 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 Arena REIT’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
ASX:ARF Earnings and Revenue Growth September 16th 2020

We note that hedge funds don’t have a meaningful investment in Arena REIT. The company’s largest shareholder is The Vanguard Group, Inc., with ownership of 7.8%. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 6.7% by the third-largest shareholder.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 Arena REIT

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.

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.

Our most recent data indicates that insiders own some shares in Arena REIT. As individuals, the insiders collectively own AU$10.0m worth of the AU$950m 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, who are mostly retail investors, collectively hold 57% of Arena REIT shares. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Arena REIT better, we need to consider many other factors. Case in point: We’ve spotted 4 warning signs for Arena REIT you should be aware of, and 1 of them doesn’t sit too well with us.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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. 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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