Retail investors invested in AutoCanada Inc. (TSE:ACQ) copped the brunt of last week's CA$114m market cap decline

Key Insights

• The considerable ownership by retail investors in AutoCanada indicates that they collectively have a greater say in management and business strategy
• The top 5 shareholders own 52% of the company
• 13% of AutoCanada is held by Institutions

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To get a sense of who is truly in control of AutoCanada Inc. (TSE:ACQ), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 40% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CA$509m last week, retail investors would have faced the highest losses than any other shareholder groups of the company.

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

See our latest analysis for AutoCanada

What Does The Institutional Ownership Tell Us About AutoCanada?

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.

As you can see, institutional investors have a fair amount of stake in AutoCanada. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 AutoCanada's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 40% of AutoCanada 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. EdgePoint Investment Group Inc. is currently the company's largest shareholder with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 10.0% and 6.7% of the stock.

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 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 AutoCanada

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 less than 1% of AutoCanada Inc.. It has a market capitalization of just CA$509m, and the board has only CA$2.6m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AutoCanada. 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 Equity Ownership

Private equity firms hold a 6.7% stake in AutoCanada. This suggests they can be influential in key policy decisions. 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. Be aware that AutoCanada is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...

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.