An analysis of stock ownership is often an important part of performing due diligence (DD) on a publicly-traded company. Strategies adopted by a company's management team can be influenced by a key shareholder or group of shareholders. This influence, in turn, can impact future share price.
How Much of GME's Float Belongs To Retail?
Retail investors are believed to own about 67.5% of GameStop's (GME) - Get Free Report float, according to Vickers Stock Research data. In their ownership breakdown chart (see below), that ownership is categorized as “others.”
GameStop's Chair Ryan Cohen himself owns about 12% of GME shares. These are held through Ryan’s holding company RC Ventures, which Vickers considers to be Institutional ownership.
Yahoo Finance, on the other hand, attributes about 15% of GameStop's ownership to all insiders, probably because they consider Cohen and his holding company to effectively be “insiders.”
The technical definition of “insider” is “a director, senior officer, entity, or individual who owns more than 10% of a publicly-traded company's voting shares.”
Since Ryan Cohen does not directly own GameStop shares, but rather owns shares through his holding company, some sources do not consider his ownership to constitute “insider” ownership. Thus, GME insider ownership corresponds to only 2% according to Vickers Stock Research.
This percentage divergence between sources is a mere technicality - but, for research purposes, it’s important to note the source of the discrepancy.
Vickers shows Blackrock and Vanguard as the top institutional holders of GME, with 7.8%, and 6.7% of the shares, respectively. However, the research firm reports 350 individual institutions holding GME shares.
Investment management company giants, such as Blackrock and Vanguard, own GME shares via their proprietary ETFs. These ETFs, in turn, end up mostly being owned by individual investors.
Institutional accounts pool assets from a limited number of clients who have millions or even billions of dollars to invest. Mutual funds, on the other hand, are primarily retail products that pool assets from a vast number of individuals who have limited funds to invest.
Among GameStop’s top mutual fund holders, the Vanguard Total Stock Market Index Fund and the iShares Core S&P Midcap ETF own 2.5% and 2.4%, respectively.
How Does This Ownership Breakdown Affect GME?
Even though a sizable chunk of GameStop is owned by institutions, it is clear that GameStop is largely owned by individual investors.
In many cases, when institutional ownership is dominant, a small group of large institutions turning against a stock can cause a selloff. Thus, one benefit of a retail-dominated ownership structure is that GameStop is not at the mercy of a few key institutional owners.
This is especially true in GME’s case, as one key institutional owner is RC Ventures (headed by GME Chair Ryan Cohen, who has little incentive to tank GME’s share price). Other major players BlackRock and Vanguard, meanwhile, own GME through passive, benchmark-tracking funds (e.g., ETFs tracking the entire S&P 500).
About 30% Of GME's Float Locked Through DRS
There’s another interesting facet to GME’s high retail ownership. This is the high level of direct registration of GME shares - a statistic heralded by the company itself and now included in quarterly reports.
The Direct Registration System (DRS) is a security registration service that provides shareholders with the option of holding their assets "on the books."
Thus, DRS can be a way for investors to hold their assets without needing a brokerage firm behind them. Through DRS, shareholders have more autonomy over their shares.
GameStop retail shareholders have seen DRS as an attractive move. When GME shares are held through DRS, they cannot fall into the hands of payment for order flow brokers. DRS also reduces the number of shares available to be loaned out to short sellers by brokerage firms.
In theory, the more GME shareholders use DRS to transfer their shares to GME’s transfer agent (Computershare, in this case), the fewer shares are available for short sellers. That impedes shorts’ ability to open new short positions and to cover currently open ones.
As reported in the latest Form 10-Q dated July 30, about 71.3 million GameStop shares were registered with Computershare. This corresponds to 30% of GME’s float.
Considering that 67% of GME's float is in the hands of individual investors, this implies that nearly half of all retail-owned shares have been registered with a transfer agent.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)