In the wake of Lifestyle Communities Limited's (ASX:LIC) latest AU$80m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, Lifestyle Communities' stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 52% of the company
• Recent purchases by insiders

To get a sense of who is truly in control of Lifestyle Communities Limited (ASX:LIC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 47% 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 5.0% last week. The recent loss, which adds to a one-year loss of 19% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Lifestyle Communities, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Lifestyle Communities.

See our latest analysis for Lifestyle Communities

What Does The Institutional Ownership Tell Us About Lifestyle Communities?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Lifestyle Communities already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Lifestyle Communities' historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 15% of Lifestyle Communities shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Brahman Capital Management Pte. Ltd. is currently the company's largest shareholder with 15% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 15% and 6.4%, of the shares outstanding, respectively. James Kelly, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

We did some more digging and found that 6 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Lifestyle Communities

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Lifestyle Communities Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around AU$98m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 26% stake in Lifestyle Communities. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 5.1%, of the Lifestyle Communities stock. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Lifestyle Communities (2 make us uncomfortable!) that you should be aware of before investing here.

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.

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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.