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Could The DGO Gold Limited (ASX:DGO) Ownership Structure Tell Us Something Useful?

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·4 min read
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A look at the shareholders of DGO Gold Limited (ASX:DGO) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

DGO Gold is a smaller company with a market capitalization of AU$259m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about DGO Gold.

Check out our latest analysis for DGO Gold

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About DGO Gold?

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.

We can see that DGO Gold does have institutional investors; and they hold a good portion of the company's stock. 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 DGO Gold's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Our data indicates that hedge funds own 13% of DGO Gold. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Regal Funds Management Pty Limited with 13% of shares outstanding. With 12% and 9.7% of the shares outstanding respectively, Ginga Pty Ltd, Asset Management Arm and Cairnglen Investments Pty Ltd are the second and third largest shareholders.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of DGO Gold

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

It seems insiders own a significant proportion of DGO Gold Limited. It has a market capitalization of just AU$259m, and insiders have AU$83m worth of shares in their own names. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 18% stake in DGO Gold. 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 14%, of the DGO Gold 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand DGO Gold better, we need to consider many other factors. For example, we've discovered 4 warning signs for DGO Gold (3 are a bit concerning!) that you should be aware of before investing here.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

This article by Simply Wall St is general in nature. 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.

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