Great Ajax Corp.’s (NYSE:AJX) latest 11% decline adds to one-year losses, institutional investors may consider drastic measures

Important Findings

• Given the large holdings of institutions in the stock, Great Ajax’s share price could be vulnerable to their trading decisions
• The top 10 shareholders own 50% of the company
• Insiders have been selling lately

If you want to know who Great Ajax Corp. (NYSE:BAC) really controls, you need to look at the composition of the stock register. And the group holding the biggest slice of the pie are institutions with 64% ownership. In other words, the group is exposed to maximum upside (or downside risk).

It follows that institutional investors were the hardest-hit group after the company’s market cap fell 11% to $170 million last week following a fall in its share price. Needless to say, the recent loss, which further adds to shareholders’ 29% year-on-year loss, may not go down well with this particular category of shareholders. Institutions, also known as “smart money,” have a huge impact on how a stock’s price moves. Consequently, if the downtrend continues, institutions could come under pressure to sell Great Ajax, which could have a negative impact on individual investors.

In the graphic below, we zoom in on the different Great Ajax ownership groups.

Check out our latest analysis for Great Ajax

What does institutional ownership tell us about Great Ajax?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they’re often more excited about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially as they grow.

As you can see, institutional investors have a significant stake in Great Ajax. This may indicate that the company has a certain level of credibility in the investor community. However, it’s best not to rely on the supposed confirmation that comes from institutional investors. They too are sometimes wrong. If several institutes change their opinion on a stock at the same time, the share price could fall quickly. It is therefore worth checking out Great Ajax’s winning history below. Of course, what really matters is the future.

Investors should note that institutions actually own more than half of the company, so collectively they can wield significant power. We find that hedge funds have no meaningful investment in Great Ajax. Wellington Management Group LLP is currently the company’s largest shareholder with 17% of outstanding shares. In comparison, the second and third largest shareholders hold around 8.4% and 6.0% of the shares, respectively. In addition, CEO Lawrence Mendelsohn owns 1.0% of the company’s stock.

We investigated further and found that 10 of the top shareholders make up about 50% of the register, meaning there are some smaller shareholders alongside larger shareholders, somewhat balancing each other’s interests.

Studying institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be done by studying analyst sentiment. Although there are some analyst reports, the company probably isn’t widely known. So it might attract more attention later.

Insider ownership of Great Ajax

The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management ultimately reports to the board of directors. However, it is not uncommon for managers to be board members, especially if they are founders or CEOs.

Insider ownership is positive when it signals leadership thinks like the true owners of the company. However, a high proportion of insiders can give immense power to even a small group within the organization. This can sometimes be negative.

We can see insiders buying shares of Great Ajax Corp. own. It has a market cap of just $170 million, and insiders have $5.4 million worth of shares in their own names. Some would say this shows an alignment of interests between shareholders and the board, although we generally prefer larger insider holdings. But it might be worth checking to see if those insiders have sold.

General Public Property

The general public, typically individual investors, hold a 32% stake in Great Ajax. While this ownership size is substantial, it may not be enough to change company policy if the decision is not aligned with other major shareholders.

Next Steps:

While it’s worth considering the different groups that own a business, there are other factors that are even more important. Notice that Great Ajax is displayed 2 warning signs in our investment analysis you should know that…

Ultimately the future is the most important thing. You can access it free Report on analysts’ forecasts for the company.

Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not tally with the annual report figures for the full year.

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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.