Every investor in Gem Diamonds Limited (LON:GEMD) should be aware of the most powerful shareholder groups. 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.
Gem Diamonds is not a large company by global standards. It has a market capitalization of UK£73m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about Gem Diamonds.
What Does The Institutional Ownership Tell Us About Gem Diamonds?
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.
We can see that Gem Diamonds does have institutional investors; and they hold a good portion of the company’s stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Gem Diamonds, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 15% of Gem Diamonds shares. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Sustainable Capital Ltd is currently the company’s largest shareholder with 22% of shares outstanding. The second and third largest shareholders are Graff Diamonds Corporation and Lansdowne Partners Limited, with an equal amount of shares to their name at 15%.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Gem Diamonds
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own less than 1% of Gem Diamonds Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It seems the board members have no more than UK£176k worth of shares in the UK£73m company. 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 holds a 17% stake in Gem Diamonds. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 22%, of the Gem Diamonds stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
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