Institutions profited after RCI Hospitality Holdings, Inc.'s (NASDAQ:RICK) market cap rose US$42m last week but retail investors profited the most

Key Insights

• Significant control over RCI Hospitality Holdings by retail investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 15 shareholders
• Recent sales by insiders

A look at the shareholders of RCI Hospitality Holdings, Inc. (NASDAQ:RICK) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While retail investors were the group that benefitted the most from last week’s US$42m market cap gain, institutions too had a 41% share in those profits.

Let's take a closer look to see what the different types of shareholders can tell us about RCI Hospitality Holdings.

View our latest analysis for RCI Hospitality Holdings

What Does The Institutional Ownership Tell Us About RCI Hospitality Holdings?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that RCI Hospitality Holdings does have institutional investors; and they hold a good portion of the company's stock. 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 RCI Hospitality Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 10% of RCI Hospitality Holdings. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is ADW Capital Management LLC with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.8% and 6.9%, of the shares outstanding, respectively. Eric Langan, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

After doing some more digging, we found that the top 15 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of RCI Hospitality Holdings

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.

Shareholders would probably be interested to learn that insiders own shares in RCI Hospitality Holdings, Inc.. In their own names, insiders own US$34m worth of stock in the US$412m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over RCI Hospitality Holdings. 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.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with RCI Hospitality Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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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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.