A look at the shareholders of Verde Agritech Plc (TSE:NPK) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
Verde Agritech is a smaller company with a market capitalization of CA$19m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased shares. Let’s take a closer look to see what the different types of shareholder can tell us about Verde Agritech.
What Does The Lack Of Institutional Ownership Tell Us About Verde Agritech?
Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.
There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it’s always possible that professional investors are avoiding a company because they don’t think it’s the best place for their money. Verde Agritech might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.
We note that hedge funds don’t have a meaningful investment in Verde Agritech. Looking at our data, we can see that the largest shareholder is the CEO Cristiano Veloso with 14% of shares outstanding. Next, we have Getulio de Paula Fonseca and Renato Gomes as the second and third largest shareholders, holding 0.5% and 0.4%, of the shares outstanding, respectively. Interestingly, Renato Gomes is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company’s top shareholders.
Our studies suggest that the top 9 shareholders collectively control less than 50% of the company’s shares, meaning that the company’s shares are widely disseminated and there is no dominant shareholder.
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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Verde Agritech
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 a reasonable proportion of Verde Agritech Plc. Insiders have a CA$3.0m stake in this CA$19m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public, mostly retail investors, hold a substantial 84% stake in NPK, suggesting it is a fairly popular stock. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
It’s always worth thinking about the different groups who own shares in a company. But to understand Verde Agritech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 6 warning signs with Verde Agritech (at least 2 which shouldn’t be ignored) , and understanding them should be part of your investment process.
If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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