Institutional investors may adopt severe steps after GB Group plc's (LON:GBG) latest 6.1% drop adds to a year losses

By
Simply Wall St
Published
February 24, 2022
AIM:GBG
Source: Shutterstock

If you want to know who really controls GB Group plc (LON:GBG), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 71% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 6.1% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 31% for shareholders. 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 GB Group, which might have negative implications on individual investors.

Let's delve deeper into each type of owner of GB Group, beginning with the chart below.

Check out our latest analysis for GB Group

ownership-breakdown
AIM:GBG Ownership Breakdown February 24th 2022

What Does The Institutional Ownership Tell Us About GB Group?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that GB Group does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at GB Group's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
AIM:GBG Earnings and Revenue Growth February 24th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in GB Group. Octopus Investments Limited is currently the company's largest shareholder with 5.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.5% and 4.3%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. 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 GB Group

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.

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 data suggests that insiders own under 1% of GB Group plc in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around UK£11m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over GB Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 5.1%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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. To that end, you should be aware of the 2 warning signs we've spotted with GB Group .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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