The big shareholder groups in Reach Subsea ASA (OB:REACH) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’
With a market capitalization of øre316m, Reach Subsea is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about REACH.
What Does The Institutional Ownership Tell Us About Reach Subsea?
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.
Reach Subsea already has institutions on the share registry. Indeed, they own 14% of 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 Reach Subsea’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Reach Subsea is not owned by hedge funds. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of Reach Subsea
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.
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.
We can see that insiders own shares in Reach Subsea ASA. In their own names, insiders own øre29m worth of stock in the øre316m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public holds a 27% stake in REACH. 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 Company Ownership
We can see that Private Companies own 14%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
It appears to us that public companies own 36% of REACH. We can’t be certain, but this is quite possible this is a strategic stake. The businesses may be similar, or work together.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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