Institutional owners may consider drastic measures as SkyCity Entertainment Group Limited's (NZSE:SKC) recent NZ$98m drop adds to long-term losses

To get a sense of who is truly in control of SkyCity Entertainment Group Limited (NZSE:SKC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 53% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by NZ$98m. The recent loss, which adds to a one-year loss of 14% for stockholders, may not sit well with this group of investors. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell SkyCity Entertainment Group which might hurt individual investors.

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

Before we look at the ownership breakdown, you might like to know that our analysis indicates that SKC is potentially undervalued!

What Does The Institutional Ownership Tell Us About SkyCity Entertainment 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.

SkyCity Entertainment Group already has institutions on the share registry. Indeed, they own a respectable stake in 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of SkyCity Entertainment Group, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. SkyCity Entertainment Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Sumitomo Mitsui Trust Asset Management Co., Ltd. with 9.4% of shares outstanding. For context, the second largest shareholder holds about 8.7% of the shares outstanding, followed by an ownership of 7.3% by the third-largest shareholder.

We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of SkyCity Entertainment 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. 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.

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 most recent data indicates that insiders own some shares in SkyCity Entertainment Group Limited. This is a big company, so it is good to see this level of alignment. Insiders own NZ$22m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 37% stake in SkyCity Entertainment Group. 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

Our data indicates that Private Companies hold 8.7%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

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.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.