Private companies are São Martinho S.A.'s (BVMF:SMTO3) biggest owners and were hit after market cap dropped R$294m

Key Insights

• The considerable ownership by private companies in São Martinho indicates that they collectively have a greater say in management and business strategy
• 58% of the company is held by a single shareholder (LJN Participações S.A.)
• Institutional ownership in São Martinho is 15%

Every investor in São Martinho S.A. (BVMF:SMTO3) should be aware of the most powerful shareholder groups. We can see that private companies 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 last week, private companies endured the biggest losses as the stock fell by 4.0%.

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

See our latest analysis for São Martinho

What Does The Institutional Ownership Tell Us About São Martinho?

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.

São Martinho already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 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. The company's largest shareholder is LJN Participações S.A., with ownership of 58%. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 1.9% and 1.5% of the shares outstanding respectively, The Vanguard Group, Inc. and Trigono Capital are the second and third largest shareholders.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of São Martinho

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over 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

It seems that Private Companies own 58%, of the São Martinho 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:

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. Be aware that São Martinho is showing 2 warning signs in our investment analysis , you should know about...

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.