Could The Esports Entertainment Group, Inc. (NASDAQ:GMBL) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
January 21, 2021
NasdaqCM:GMBL

Every investor in Esports Entertainment Group, Inc. (NASDAQ:GMBL) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Esports Entertainment Group is a smaller company with a market capitalization of US$101m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions don't own many shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Esports Entertainment Group.

View our latest analysis for Esports Entertainment Group

ownership-breakdown
NasdaqCM:GMBL Ownership Breakdown January 21st 2021

What Does The Institutional Ownership Tell Us About Esports 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.

Since institutions own only a small portion of Esports Entertainment Group, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

earnings-and-revenue-growth
NasdaqCM:GMBL Earnings and Revenue Growth January 21st 2021

Esports Entertainment Group is not owned by hedge funds. Second Generation Holding Trust is currently the company's largest shareholder with 26% of shares outstanding. For context, the second largest shareholder holds about 8.0% of the shares outstanding, followed by an ownership of 3.9% by the third-largest shareholder.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Esports Entertainment Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

I can report that insiders do own shares in Esports Entertainment Group, Inc.. It has a market capitalization of just US$101m, and insiders have US$5.4m worth of shares, in their own names. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, mostly retail investors, hold a substantial 57% stake in Esports Entertainment Group, suggesting it is a fairly popular stock. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

Our data indicates that Private Companies hold 36%, 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. Be aware that Esports Entertainment Group is showing 4 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

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. 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.
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