A look at the shareholders of ARC Document Solutions, Inc. (NYSE:ARC) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
ARC Document Solutions is a smaller company with a market capitalization of US$59m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about ARC Document Solutions.
What Does The Institutional Ownership Tell Us About ARC Document Solutions?
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.
ARC Document Solutions already has institutions on the share registry. Indeed, they own 51% of the company. 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. 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 ARC Document Solutions, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 7.6% of ARC Document Solutions shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is the CEO Suriyakumar Kumarakulasingam with 9.7% of shares outstanding. Next, we have Renaissance Technologies Corp. and Dimensional Fund Advisors L.P. as the second and third largest shareholders, holding 7.6% and 6.1%, of the shares outstanding, respectively.
We also observed that the top 10 shareholders account for 52% of the register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of ARC Document Solutions
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. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
It seems insiders own a significant proportion of ARC Document Solutions, Inc.. Insiders have a US$11m stake in this US$59m business. 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 holds a 22% stake in ARC. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
It’s always worth thinking about the different groups who own shares in a company. But to understand ARC Document Solutions better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with ARC Document Solutions (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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