Stock Analysis

Reading International, Inc.'s (NASDAQ:RDI) latest 12% decline adds to one-year losses, institutional investors may consider drastic measures

  •  Updated
NasdaqCM:RDI
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A look at the shareholders of Reading International, Inc. (NASDAQ:RDI) can tell us which group is most powerful. The group holding the most number of shares in the company, around 32% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 37% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Reading International, which might have negative implications on individual investors.

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

Before we look at the ownership breakdown, you might like to know that our analysis indicates that RDI is potentially overvalued!

ownership-breakdown
NasdaqCM:RDI Ownership Breakdown September 30th 2022

What Does The Institutional Ownership Tell Us About Reading International?

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.

Reading International already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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.

earnings-and-revenue-growth
NasdaqCM:RDI Earnings and Revenue Growth September 30th 2022

It looks like hedge funds own 15% of Reading International shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Nantahala Capital Management, LLC is the largest shareholder with 15% of shares outstanding. James J. Cotter Living Trust is the second largest shareholder owning 8.4% of common stock, and Wittenberg Investment Management Inc holds about 6.2% of the company stock. In addition, we found that Ellen Cotter, the CEO has 4.0% of the shares allocated to their name.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Reading International, Inc.. Insiders have a US$11m 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

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Reading International. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 12%, of the shares on issue. 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:

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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Reading International you should know about.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Reading International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqCM:RDI

Reading International

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.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth4
Past Performance0
Financial Health1
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Reasonable growth potential and fair value.