Could The RMA Global Limited (ASX:RMY) Ownership Structure Tell Us Something Useful?

Every investor in RMA Global Limited (ASX:RMY) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’

RMA Global is not a large company by global standards. It has a market capitalization of AU$79m, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about RMY.

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ASX:RMY Ownership Summary January 24th 19
ASX:RMY Ownership Summary January 24th 19

What Does The Institutional Ownership Tell Us About RMA Global?

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 RMA Global does have institutional investors; and they hold 8.3% of the stock. 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. 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 RMA Global’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:RMY Income Statement Export January 24th 19
ASX:RMY Income Statement Export January 24th 19

RMA Global is not owned by hedge funds. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of RMA Global

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 most recent data indicates that insiders own the majority of RMA Global Limited. This means they can collectively make decisions for the company. Given it has a market cap of AU$79m, that means they have AU$48m worth of shares. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, with a 17% stake in the company, will not easily be ignored. 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.

Private Company Ownership

Our data indicates that Private Companies hold 14%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand RMA Global better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.