Institutional owners may consider drastic measures as AgroGalaxy Participações S.A.'s (BVMF:AGXY3) recent R$77m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies AgroGalaxy Participações' stock price is sensitive to their trading actions
• 55% of the business is held by the top 3 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of AgroGalaxy Participações S.A. (BVMF:AGXY3), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 58% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to R$614m last week after a 11% drop in the share price. The recent loss, which adds to a one-year loss of 53% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell AgroGalaxy Participações which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of AgroGalaxy Participações.

See our latest analysis for AgroGalaxy Participações

What Does The Institutional Ownership Tell Us About AgroGalaxy Participações?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that AgroGalaxy Participações does have institutional investors; and they hold a good portion of the company's stock. 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 AgroGalaxy Participações' 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. Hedge funds don't have many shares in AgroGalaxy Participações. Paraty Capital is currently the company's largest shareholder with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 23% and 6.2% of the stock.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 55% stake.

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 AgroGalaxy Participações

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data cannot confirm that board members are holding shares personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

The general public, who are usually individual investors, hold a 41% stake in AgroGalaxy Participações. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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. Be aware that AgroGalaxy Participações is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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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.