African Rainbow Capital Investments Limited's (JSE:AIL) stock price dropped 16% last week; private companies would not be happy

Key Insights

• Significant control over African Rainbow Capital Investments by private companies implies that the general public has more power to influence management and governance-related decisions
• 53% of the company is held by a single shareholder (Ubuntu-Botho Investments Pty Ltd.)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in African Rainbow Capital Investments Limited (JSE:AIL) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 55% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 16% decline in share price, private companies suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about African Rainbow Capital Investments.

Check out our latest analysis for African Rainbow Capital Investments

What Does The Institutional Ownership Tell Us About African Rainbow Capital Investments?

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.

Less than 5% of African Rainbow Capital Investments is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

We note that hedge funds don't have a meaningful investment in African Rainbow Capital Investments. Our data shows that Ubuntu-Botho Investments Pty Ltd. is the largest shareholder with 53% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Meanwhile, the second and third largest shareholders, hold 13% and 5.5%, of the shares outstanding, respectively.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of African Rainbow Capital Investments

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 African Rainbow Capital Investments Limited. In their own names, insiders own R309m worth of stock in the R5.6b company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 25% 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

Our data indicates that Private Companies hold 55%, of the company's shares. 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 African Rainbow Capital Investments better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.