Today, I will be analyzing Gaming Realms plc’s (AIM:GMR) recent ownership structure, an important but not-so-popular subject among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, it is beneficial for us to examine GMR’s ownership structure in more detail.See our latest analysis for GMR
Institutional OwnershipGMR’s 58.55% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. With hedge funds holding a 5.44% stake in the company, its share price can experience heightened volatility. I am going to further examine GMR’s ownership structure to check how other major shareholders can affect its investment case.
Insider OwnershipInsiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A major group of owners of GMR is individual insiders, sitting with a hefty 27.86% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipWith a stake of less than 1% ownership, the general public are a relatively smaller ownership class in GMR. This size of ownership may not be enough to sway a policy decision in their favour, but they can still make a collective impact on company policies if it aligns with other large shareholders.
Private Company OwnershipPotential investors in GMR should also look at another important group of investors: private companies, with a stake of 8.01%, who are primarily invested because of strategic and capital gain interests. An ownership of this size indicates a strong financial backing and has the potential to influence GMR’s business strategy. Thus, investors should dig deeper into GMR’s business relations with these companies and how it can affect shareholder returns in the long-term.
What this means for you:
Are you a shareholder? I suggest investors seek some degree of margin of safety due to high institutional ownership in GMR, in particular due to the strong presence of active hedge fund investors. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. If you’re interested in bolstering your portfolio with new stocks and are looking for ideas, take a look at our free app to see my list of stocks with a strong growth potential.
Are you a potential investor? Ownership structure should not be the only focus of your research when constructing an investment thesis around GMR. Rather, you should be looking at fundamental drivers like the future growth expectations around GMR, which is a key factor that will influence GMR’s share value. Take a look at our most recent infographic report on GMR for a more in-depth analysis of these factors to help you make a more well-informed investment decision.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.