While institutions invested in African Rainbow Minerals Limited (JSE:ARI) benefited from last week's 6.1% gain, private companies stood to gain the most

Key Insights

• Significant control over African Rainbow Minerals by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 56% of the company
• Institutions own 39% of African Rainbow Minerals

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If you want to know who really controls African Rainbow Minerals Limited (JSE:ARI), 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 private companies with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private companies were the group that benefitted the most from last week’s R2.2b market cap gain, institutions too had a 39% share in those profits.

In the chart below, we zoom in on the different ownership groups of African Rainbow Minerals.

View our latest analysis for African Rainbow Minerals

What Does The Institutional Ownership Tell Us About African Rainbow Minerals?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

African Rainbow Minerals 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. 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 African Rainbow Minerals, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in African Rainbow Minerals. African Rainbow Minerals & Exploration Investments (Pty) Ltd. is currently the largest shareholder, with 46% of shares outstanding. Public Investment Corporation Limited is the second largest shareholder owning 11% of common stock, and Coronation Fund Managers Limited holds about 5.3% of the company stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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

Insider Ownership Of African Rainbow Minerals

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of African Rainbow Minerals Limited in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own R262m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in African Rainbow Minerals. 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

It seems that Private Companies own 46%, of the African Rainbow Minerals stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand African Rainbow Minerals better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with African Rainbow Minerals .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.