A look at the shareholders of Ares Commercial Real Estate Corporation (NYSE:ACRE) 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. We also tend to see lower insider ownership in companies that were previously publicly owned.
Ares Commercial Real Estate is a smaller company with a market capitalization of US$323m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholders can tell us about Ares Commercial Real Estate.
What Does The Institutional Ownership Tell Us About Ares Commercial Real Estate?
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.
We can see that Ares Commercial Real Estate does have institutional investors; and they hold a good portion of the company’s stock. 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 Ares Commercial Real Estate’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 5.0% of Ares Commercial Real Estate shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 9.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.0% and 4.8% of the stock.
After doing some more digging, we found that the top 19 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Ares Commercial Real Estate
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.
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 Ares Commercial Real Estate Corporation. In their own names, insiders own US$15m worth of stock in the US$323m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 31% ownership, the general public have some degree of sway over Ares Commercial Real Estate. 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 Ares Commercial Real Estate better, we need to consider many other factors. For instance, we’ve identified 6 warning signs for Ares Commercial Real Estate (2 can’t be ignored) that you should be aware of.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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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