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With 68% institutional ownership, Redcentric plc (LON:RCN) is a favorite amongst the big guns

Key Insights

  • Significantly high institutional ownership implies Redcentric's stock price is sensitive to their trading actions

  • The top 4 shareholders own 55% of the company

  • Insiders have bought recently

To get a sense of who is truly in control of Redcentric plc (LON:RCN), it is important to understand the ownership structure of the business. With 68% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

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Let's take a closer look to see what the different types of shareholders can tell us about Redcentric.

See our latest analysis for Redcentric

ownership-breakdown
AIM:RCN Ownership Breakdown January 6th 2024

What Does The Institutional Ownership Tell Us About Redcentric?

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.

Redcentric already has institutions on the share registry. Indeed, they own a respectable stake in 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 Redcentric's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
AIM:RCN Earnings and Revenue Growth January 6th 2024

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Redcentric is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Lombard Odier Asset Management (Europe) Ltd. with 16% of shares outstanding. With 16% and 12% of the shares outstanding respectively, ND Capital Investments Limited and Slater Investments Limited are the second and third largest shareholders.

Our research also brought to light the fact that roughly 55% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Redcentric

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

Our information suggests that Redcentric plc insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about UK£884k worth of stock. This compares to a market capitalization of UK£200m. 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

The general public, who are usually individual investors, hold a 12% stake in Redcentric. 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 19%, of the Redcentric stock. 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.

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 example, we've discovered 1 warning sign for Redcentric that you should be aware of before investing here.

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.