Institutional investors are Galiano Gold Inc.'s (TSE:GAU) biggest bettors and were rewarded after last week's CA$82m market cap gain

Key Insights

• Given the large stake in the stock by institutions, Galiano Gold's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 52% of the company
• Insiders have bought recently

A look at the shareholders of Galiano Gold Inc. (TSE:GAU) can tell us which group is most powerful. With 31% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit CA$534m in market cap. The one-year return on investment is currently 199% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Galiano Gold.

View our latest analysis for Galiano Gold

What Does The Institutional Ownership Tell Us About Galiano Gold?

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.

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

It would appear that 18% of Galiano Gold shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Gold Fields Limited is currently the largest shareholder, with 20% of shares outstanding. With 13% and 7.0% of the shares outstanding respectively, Equinox Partners Investment Management LLC and Donald Smith & Co., Inc. are the second and third largest shareholders.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Galiano Gold

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.

Our data suggests that insiders own under 1% of Galiano Gold Inc. in their own names. It appears that the board holds about CA$2.7m worth of stock. This compares to a market capitalization of CA$534m. 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 27% stake in Galiano Gold. 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.

Public Company Ownership

Public companies currently own 23% of Galiano Gold stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Galiano Gold better, we need to consider many other factors. Be aware that Galiano Gold is showing 1 warning sign in our investment analysis , you should know about...

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.