Could The NeoGames S.A. (NASDAQ:NGMS) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
May 21, 2021
NasdaqGM:NGMS
Source: Shutterstock

Every investor in NeoGames S.A. (NASDAQ:NGMS) 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. 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.

NeoGames has a market capitalization of US$1.4b, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about NeoGames.

See our latest analysis for NeoGames

ownership-breakdown
NasdaqGM:NGMS Ownership Breakdown May 27th 2021

What Does The Institutional Ownership Tell Us About NeoGames?

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 NeoGames 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. 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 NeoGames, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGM:NGMS Earnings and Revenue Growth May 27th 2021

We note that hedge funds don't have a meaningful investment in NeoGames. Caesars Entertainment, Inc. is currently the company's largest shareholder with 3.0% of shares outstanding. For context, the second largest shareholder holds about 2.6% of the shares outstanding, followed by an ownership of 2.5% by the third-largest shareholder. Barak Matalon, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 NeoGames

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own some shares in NeoGames S.A.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$93m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public holds a substantial 73% stake in NeoGames, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with NeoGames .

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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.

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