After losing 6.6% in the past year, G8 Education Limited (ASX:GEM) institutional owners must be relieved by the recent gain

By
Simply Wall St
Published
February 01, 2022
ASX:GEM
Source: Shutterstock

A look at the shareholders of G8 Education Limited (ASX:GEM) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 6.6% losses, last week’s 8.7% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of G8 Education.

Check out our latest analysis for G8 Education

ownership-breakdown
ASX:GEM Ownership Breakdown February 1st 2022

What Does The Institutional Ownership Tell Us About G8 Education?

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 G8 Education. 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. 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 G8 Education's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
ASX:GEM Earnings and Revenue Growth February 1st 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in G8 Education. Orbis Investment Management Limited is currently the company's largest shareholder with 16% of shares outstanding. Nikko Asset Management Co., Ltd. is the second largest shareholder owning 6.7% of common stock, and Host-Plus Pty. Limited holds about 6.5% of the company stock.

We also observed that the top 9 shareholders account for more than half of the share 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of G8 Education

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that G8 Education Limited insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It seems the board members have no more than AU$3.6m worth of shares in the AU$958m company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 41% stake in G8 Education. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand G8 Education better, we need to consider many other factors. Take risks for example - G8 Education has 1 warning sign we think 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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