In the wake of Accel Entertainment, Inc.'s (NYSE:ACEL) latest US$54m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Accel Entertainment's stock price is sensitive to their trading actions
• The top 6 shareholders own 51% of the company
• Insiders own 10% of Accel Entertainment

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If you want to know who really controls Accel Entertainment, Inc. (NYSE:ACEL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$54m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 8.3% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell Accel Entertainment, which might have negative implications on individual investors.

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

View our latest analysis for Accel Entertainment

What Does The Institutional Ownership Tell Us About Accel Entertainment?

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.

As you can see, institutional investors have a fair amount of stake in Accel Entertainment. 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 Accel Entertainment, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 16% of Accel Entertainment shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is Clairvest Group Inc., with ownership of 20%. Meanwhile, the second and third largest shareholders, hold 9.6% and 6.6%, of the shares outstanding, respectively. Additionally, the company's CEO Andrew Rubenstein directly holds 4.7% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Accel Entertainment

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.

It seems insiders own a significant proportion of Accel Entertainment, Inc.. Insiders have a US$90m stake in this US$881m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 20%, private equity firms could influence the Accel Entertainment board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Accel Entertainment better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Accel Entertainment you should be aware of, and 1 of them is concerning.

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.