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Could The DRDGOLD Limited (NYSE:DRD) Ownership Structure Tell Us Something Useful?

Simply Wall St

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A look at the shareholders of DRDGOLD Limited (NYSE:DRD) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.

DRDGOLD is a smaller company with a market capitalization of US$198m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about DRD.

View our latest analysis for DRDGOLD

NYSE:DRD Ownership Summary, July 15th 2019

What Does The Institutional Ownership Tell Us About DRDGOLD?

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.

DRDGOLD already has institutions on the share registry. Indeed, they own 35% of 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 DRDGOLD's historic earnings and revenue, below, but keep in mind there's always more to the story.

NYSE:DRD Income Statement, July 15th 2019

Our data indicates that hedge funds own 5.7% of DRDGOLD. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of DRDGOLD

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our data suggests that insiders own under 1% of DRDGOLD Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about US$629k worth of stock. This compares to a market capitalization of US$198m. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

With a 15% ownership, the general public have some degree of sway over DRD. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 4.8%, of the company's shares. 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.

Public Company Ownership

We can see that public companies hold 39%, of the DRD shares on issue. It's hard to say for sure, but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand DRDGOLD better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.