Painful week for private equity firms invested in Smartfit Escola de Ginástica e Dança S.A. (BVMF:SMFT3) after 5.4% drop, institutions also suffered losses

Key Insights

• The considerable ownership by private equity firms in Smartfit Escola de Ginástica e Dança indicates that they collectively have a greater say in management and business strategy
• 60% of the business is held by the top 3 shareholders
• 30% of Smartfit Escola de Ginástica e Dança is held by Institutions

Every investor in Smartfit Escola de Ginástica e Dança S.A. (BVMF:SMFT3) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 33% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 5.4% decrease in the stock price last week, private equity firms suffered the most losses, but institutions who own 30% stock also took a hit.

Let's delve deeper into each type of owner of Smartfit Escola de Ginástica e Dança, beginning with the chart below.

Check out our latest analysis for Smartfit Escola de Ginástica e Dança

What Does The Institutional Ownership Tell Us About Smartfit Escola de Ginástica e Dança?

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 Smartfit Escola de Ginástica e Dança does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Smartfit Escola de Ginástica e Dança's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Smartfit Escola de Ginástica e Dança. The company's largest shareholder is Patria Investimentos Ltda, with ownership of 33%. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 12% by the third-largest shareholder.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Smartfit Escola de Ginástica e Dança

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.

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. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Smartfit Escola de Ginástica e Dança. 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 Equity Ownership

Private equity firms hold a 33% stake in Smartfit Escola de Ginástica e Dança. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 24%, of the Smartfit Escola de Ginástica e Dança stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Smartfit Escola de Ginástica e Dança 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.