ClearView Wealth Limited's (ASX:CVW) stock price dropped 11% last week; private equity firms would not be happy

Published
June 14, 2022
ASX:CVW
Source: Shutterstock

If you want to know who really controls ClearView Wealth Limited (ASX:CVW), then you'll have to look at the makeup of its share registry. We can see that private equity firms own the lion's share in the company with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 11% decline in share price, private equity firms suffered the most losses.

Let's delve deeper into each type of owner of ClearView Wealth, beginning with the chart below.

See our latest analysis for ClearView Wealth

ownership-breakdown
ASX:CVW Ownership Breakdown June 14th 2022

What Does The Institutional Ownership Tell Us About ClearView Wealth?

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 ClearView Wealth. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 ClearView Wealth's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ASX:CVW Earnings and Revenue Growth June 14th 2022

We note that hedge funds don't have a meaningful investment in ClearView Wealth. Crescent Capital Partners Management Pty Ltd. is currently the company's largest shareholder with 45% of shares outstanding. With 15% and 4.3% of the shares outstanding respectively, Sony Financial Holdings Inc., Asset Management Arm and Ariadne Australia Limited are the second and third largest shareholders. In addition, we found that Simon Swanson, the CEO has 2.4% of the shares allocated to their name.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of ClearView Wealth

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.

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 some shares in ClearView Wealth Limited. It has a market capitalization of just AU$436m, and insiders have AU$26m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 45%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

We can see that public companies hold 4.3% of the ClearView Wealth shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 4 warning signs we've spotted with ClearView Wealth (including 1 which is a bit concerning) .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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