- United States
Institutional owners may consider drastic measures as Reading International, Inc.'s (NASDAQ:RDI) recent US$9.5m drop adds to long-term losses
- Significantly high institutional ownership implies Reading International's stock price is sensitive to their trading actions
- The top 8 shareholders own 50% of the company
- Insider ownership in Reading International is 14%
Every investor in Reading International, Inc. (NASDAQ:RDI) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 36% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$102m last week after a 12% drop in the share price. The recent loss, which adds to a one-year loss of 30% 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. Hence, if weakness in Reading International's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's delve deeper into each type of owner of Reading International, beginning with the chart below.
Check out our latest analysis for Reading International
What Does The Institutional Ownership Tell Us About Reading International?
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 Reading International. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Reading International's historic earnings and revenue below, but keep in mind there's always more to the story.
Our data indicates that hedge funds own 13% of Reading International. 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 Nantahala Capital Management, LLC with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.0% and 6.6%, of the shares outstanding, respectively. Margaret Cotter, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO Ellen Cotter directly holds 4.0% of the total shares outstanding.
We did some more digging and found that 8 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. 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 Reading International
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our information suggests that insiders maintain a significant holding in Reading International, Inc.. Insiders have a US$14m stake in this US$102m 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 28% stake in the company, and hence can't easily be ignored. 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
It seems that Private Companies own 9.1%, of the Reading International stock. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Reading International better, we need to consider many other factors. For instance, we've identified 2 warning signs for Reading International (1 can't be ignored) that you should be aware of.
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.
Reading International, Inc., together with its subsidiaries, focuses on the ownership, development, and operation of entertainment and real property assets in the United States, Australia, and New Zealand.
Fair value with concerning outlook.