Public companies who have a significant stake must be disappointed along with institutions after BRF S.A.'s (BVMF:BRFS3) market cap dropped by R$3.8b

Key Insights

• The considerable ownership by public companies in BRF indicates that they collectively have a greater say in management and business strategy
• 53% of the company is held by a single shareholder (Marfrig Global Foods S.A.)
• Institutions own 19% of BRF

To get a sense of who is truly in control of BRF S.A. (BVMF:BRFS3), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While the holdings of public companies took a hit after last week’s 8.2% price drop, institutions with their 19% holdings also suffered.

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

View our latest analysis for BRF

What Does The Institutional Ownership Tell Us About BRF?

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.

BRF already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of BRF, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in BRF. The company's largest shareholder is Marfrig Global Foods S.A., with ownership of 53%. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 6.3% by the third-largest shareholder.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of BRF

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 information suggests that BRF S.A. insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own R$16m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 17% stake in BRF. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 11%, of the BRF stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

It appears to us that public companies own 53% of BRF. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand BRF better, we need to consider many other factors. Take risks for example - BRF has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.