African Rainbow Minerals Limited's (JSE:ARI) market cap touched R35b last week, benefiting both retail investors who own 57% as well as institutions
Key Insights
African Rainbow Minerals' significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
A total of 25 investors have a majority stake in the company with 38% ownership
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. With 57% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Retail investors gained the most after market cap touched R35b last week, while institutions who own 31% also benefitted.
Let's take a closer look to see what the different types of shareholders can tell us about African Rainbow Minerals.
See 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.
As you can see, institutional investors have a fair amount of stake in African Rainbow Minerals. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 African Rainbow Minerals' historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in African Rainbow Minerals. Our data shows that Public Investment Corporation Limited is the largest shareholder with 11% of shares outstanding. With 3.9% and 3.4% of the shares outstanding respectively, Fairtree Asset Management (Pty) Ltd and Allan Gray Proprietary Ltd. are the second and third largest shareholders.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of African Rainbow Minerals
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. 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.
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 information suggests that African Rainbow Minerals Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around R214m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public -- including retail investors -- own 57% of African Rainbow Minerals. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for African Rainbow Minerals (1 is concerning) that you should be aware of.
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.
