Is ReadyTech Holdings Limited (ASX:RDY) Popular Amongst Insiders?

Every investor in ReadyTech Holdings Limited (ASX:RDY) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

ReadyTech Holdings is a smaller company with a market capitalization of AU$150m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholders can tell us about ReadyTech Holdings.

See our latest analysis for ReadyTech Holdings

ownership-breakdown
ASX:RDY Ownership Breakdown September 10th 2020

What Does The Institutional Ownership Tell Us About ReadyTech Holdings?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that ReadyTech Holdings does have institutional investors; and they hold a good portion of the company’s stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 ReadyTech Holdings’ earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
ASX:RDY Earnings and Revenue Growth September 10th 2020

ReadyTech Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Pemba Capital Partners Pty Limited with 42% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 5.0%, of the shares outstanding, respectively. Marc Washbourne, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of ReadyTech Holdings

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of ReadyTech Holdings Limited. Insiders have a AU$18m stake in this AU$150m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 19% ownership, the general public have some degree of sway over ReadyTech Holdings. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 42%, private equity firms could influence the ReadyTech Holdings board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

We can see that Private Companies own 7.7%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand ReadyTech Holdings better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for ReadyTech Holdings that you should be aware of before investing here.

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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