EML Payments Limited's (ASX:EML) market cap touched AU$373m last week, benefiting both individual investors who own 50% as well as institutions

Key Insights

• The considerable ownership by individual investors in EML Payments indicates that they collectively have a greater say in management and business strategy
• 50% of the business is held by the top 25 shareholders
• Insider ownership in EML Payments is 11%

To get a sense of who is truly in control of EML Payments Limited (ASX:EML), it is important to understand the ownership structure of the business. With 50% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that benefitted the most from last week’s AU$39m market cap gain, institutions too had a 30% share in those profits.

Let's delve deeper into each type of owner of EML Payments, beginning with the chart below.

Check out our latest analysis for EML Payments

What Does The Institutional Ownership Tell Us About EML Payments?

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 EML Payments. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of EML Payments, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in EML Payments. Looking at our data, we can see that the largest shareholder is Patrick Haley with 8.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.0% and 6.4% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of EML Payments

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. 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 most recent data indicates that insiders own a reasonable proportion of EML Payments Limited. Insiders have a AU$41m stake in this AU$373m business. We 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

The general public -- including retail investors -- own 50% of EML Payments. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

With an ownership of 6.4%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com