AMA Group Limited's (ASX:AMA) recent 11% pullback adds to one-year year losses, institutional owners may take drastic measures

By
Simply Wall St
Published
May 11, 2022
ASX:AMA
Source: Shutterstock

To get a sense of who is truly in control of AMA Group Limited (ASX:AMA), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 11% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 47% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in AMA Group's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of AMA Group.

View our latest analysis for AMA Group

ownership-breakdown
ASX:AMA Ownership Breakdown May 11th 2022

What Does The Institutional Ownership Tell Us About AMA Group?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in AMA Group. 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. 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 AMA Group's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ASX:AMA Earnings and Revenue Growth May 11th 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in AMA Group. The company's largest shareholder is Mittleman Brothers, LLC, with ownership of 11%. Meanwhile, the second and third largest shareholders, hold 10.0% and 4.5%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 52% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of AMA Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

We can report that insiders do own shares in AMA Group Limited. As individuals, the insiders collectively own AU$12m worth of the AU$245m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 39% stake in AMA Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand AMA Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for AMA Group you should be aware of.

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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