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A look at the shareholders of Inspired Entertainment, Inc. (NASDAQ:INSE) 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. 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.
Inspired Entertainment is a smaller company with a market capitalization of US$159m, 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 seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Inspired Entertainment.
What Does The Institutional Ownership Tell Us About Inspired Entertainment?
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.
Inspired Entertainment already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Inspired Entertainment's historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 16% of Inspired Entertainment shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Vitruvian Partners LLP is currently the largest shareholder, with 29% of shares outstanding. With 16% and 13% of the shares outstanding respectively, HG Vora Capital Management, LLC and Macquarie Group, Ltd., Banking & Securities Investments are the second and third largest shareholders.
After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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 Inspired Entertainment
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Inspired Entertainment, Inc.. As individuals, the insiders collectively own US$8.2m worth of the US$159m company. This shows at least some alignment, but I usually like to see larger insider holdings. 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 Inspired Entertainment. 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 Equity Ownership
Private equity firms hold a 29% stake in Inspired Entertainment. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Inspired Entertainment , and understanding them should be part of your investment process.
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.
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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