Institutional owners may ignore CGI Inc.'s (TSE:GIB.A) recent CA$2.5b market cap decline as longer-term profits stay in the green
Key Insights
Significantly high institutional ownership implies CGI's stock price is sensitive to their trading actions
The top 19 shareholders own 50% of the company
If you want to know who really controls CGI Inc. (TSE:GIB.A), 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 institutions with 60% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors endured the highest losses after the company's market cap fell by CA$2.5b last week. Still, the 16% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of CGI.
See our latest analysis for CGI
What Does The Institutional Ownership Tell Us About CGI?
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.
We can see that CGI does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at CGI's earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in CGI. The company's largest shareholder is Distinction Capital, with ownership of 10%. For context, the second largest shareholder holds about 8.2% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.
After doing some more digging, we found that the top 19 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of CGI
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.
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.
We can see that insiders own shares in CGI Inc.. It is a very large company, and board members collectively own CA$358m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 10%, private equity firms could influence the CGI board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
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.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
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.
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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.
