Private equity firms among Genesis Land Development Corp.'s (TSE:GDC) largest stockholders and were hit after last week's 11% price drop

By
Simply Wall St
Published
May 11, 2022
TSX:GDC
Source: Shutterstock

To get a sense of who is truly in control of Genesis Land Development Corp. (TSE:GDC), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 54% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 11% decrease in the stock price last week, private equity firms suffered the most losses, but insiders who own 22% stock also took a hit.

Let's delve deeper into each type of owner of Genesis Land Development, beginning with the chart below.

Check out our latest analysis for Genesis Land Development

ownership-breakdown
TSX:GDC Ownership Breakdown May 11th 2022

What Does The Institutional Ownership Tell Us About Genesis Land Development?

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.

We can see that Genesis Land Development does have institutional investors; and they hold a good portion of the company's 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 Genesis Land Development's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:GDC Earnings and Revenue Growth May 11th 2022

Genesis Land Development is not owned by hedge funds. Our data shows that Smoothwater Capital Corporation is the largest shareholder with 54% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. For context, the second largest shareholder holds about 20% of the shares outstanding, followed by an ownership of 7.1% by the third-largest 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Genesis Land Development

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Genesis Land Development Corp.. Insiders own CA$30m worth of shares in the CA$138m company. 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, who are usually individual investors, hold a 11% stake in Genesis Land Development. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 54%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Genesis Land Development better, we need to consider many other factors. Be aware that Genesis Land Development is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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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