Veste S.A. Estilo's (BVMF:VSTE3) recent 20% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, Veste Estilo's stock price might be vulnerable to their trading decisions
• 56% of the business is held by the top 2 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Veste S.A. Estilo (BVMF:VSTE3), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 38% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 20% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 65% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Veste Estilo's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Veste Estilo.

Check out our latest analysis for Veste Estilo

What Does The Institutional Ownership Tell Us About Veste Estilo?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Veste Estilo does have institutional investors; and they hold a good portion of the company's stock. 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 Veste Estilo's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 11% of Veste Estilo shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company's largest shareholder is WNT Gestora De Recursos Ltda., with ownership of 38%. In comparison, the second and third largest shareholders hold about 18% and 11% of the stock.

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.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Veste Estilo

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in Veste S.A. Estilo. As individuals, the insiders collectively own R$19m worth of the R$889m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Veste Estilo. 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.

Private Company Ownership

It seems that Private Companies own 27%, of the Veste Estilo stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Take risks for example - Veste Estilo has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.