The big shareholder groups in Ares Commercial Real Estate Corporation (NYSE:ACRE) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.
Ares Commercial Real Estate is not a large company by global standards. It has a market capitalization of US$729m, 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 take a closer look to see what the different types of shareholders can tell us about Ares Commercial Real Estate.
What Does The Institutional Ownership Tell Us About Ares Commercial Real Estate?
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 Ares Commercial Real Estate. 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 Ares Commercial Real Estate’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Ares Commercial Real Estate is not owned by hedge funds. The company’s largest shareholder is BlackRock, Inc., with ownership of 8.6%. The Vanguard Group, Inc. is the second largest shareholder owning 4.7% of common stock, and 1832 Asset Management L.P. holds about 3.4% of the company stock.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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. 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 Ares Commercial Real Estate
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own some shares in Ares Commercial Real Estate Corporation. It has a market capitalization of just US$729m, and insiders have US$24m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 42% ownership, the general public have some degree of sway over Ares Commercial Real Estate. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
It’s always worth thinking about the different groups who own shares in a company. But to understand Ares Commercial Real Estate better, we need to consider many other factors. Take risks for example – Ares Commercial Real Estate has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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. 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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