Private companies are São Martinho S.A.'s (BVMF:SMTO3) biggest owners and were hit after market cap dropped R$515m

Key Insights

• Significant control over São Martinho by private companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is LJN Participações S.A. with a 55% stake
• Institutional ownership in São Martinho is 14%

Every investor in São Martinho S.A. (BVMF:SMTO3) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 55% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private companies endured the biggest losses as the stock fell by 4.5%.

Let's take a closer look to see what the different types of shareholders can tell us about São Martinho.

Check out our latest analysis for São Martinho

What Does The Institutional Ownership Tell Us About São Martinho?

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 São Martinho. 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 São Martinho's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in São Martinho. LJN Participações S.A. is currently the company's largest shareholder with 55% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 1.8% of the shares outstanding, followed by an ownership of 1.6% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of São Martinho

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.

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.

We note our data does not show any board members 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 31% stake in São Martinho. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 55%, of the shares on issue. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand São Martinho better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with São Martinho (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

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