Yahoo Finance Institutional investors control 87% of Rambus Inc. (NASDAQ:RMBS) and were rewarded last week after stock increased 18%
Key Insights
Institutions' substantial holdings in Rambus implies that they have significant influence over the company's share price
A total of 10 investors have a majority stake in the company with 51% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Rambus Inc. (NASDAQ:RMBS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 87% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 18% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 139%.
Let's take a closer look to see what the different types of shareholders can tell us about Rambus.
View our latest analysis for Rambus
What Does The Institutional Ownership Tell Us About Rambus?
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.
As you can see, institutional investors have a fair amount of stake in Rambus. 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 Rambus' historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Rambus is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 16%. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 4.2% by the third-largest shareholder.
We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Rambus
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 most recent data indicates that insiders own less than 1% of Rambus Inc.. Keep in mind that it's a big company, and the insiders own US$44m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Rambus. 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Rambus .
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.
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