Locaweb Serviços de Internet S.A.'s (BVMF:LWSA3) one-year returns climbed after last week's 10% gain, institutional investors must be happy

Key Insights

• Institutions' substantial holdings in Locaweb Serviços de Internet implies that they have significant influence over the company's share price
• A total of 7 investors have a majority stake in the company with 51% ownership
• 27% of Locaweb Serviços de Internet is held by insiders

To get a sense of who is truly in control of Locaweb Serviços de Internet S.A. (BVMF:LWSA3), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 44% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week’s 10% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 1.8% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Locaweb Serviços de Internet.

Check out our latest analysis for Locaweb Serviços de Internet

What Does The Institutional Ownership Tell Us About Locaweb Serviços de Internet?

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.

Locaweb Serviços de Internet already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Locaweb Serviços de Internet, (below). Of course, keep in mind that there are other factors to consider, too.

Locaweb Serviços de Internet is not owned by hedge funds. Our data shows that General Atlantic Service Company, L.P. is the largest shareholder with 15% of shares outstanding. The second and third largest shareholders are Gilberto Mautner and Claudio Gora, with an equal amount of shares to their name at 6.2%. Two of the top three shareholders happen to be Top Key Executive and Member of the Board of Directors, respectively. That is, insiders feature higher up in the heirarchy of the company's top shareholders.

We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 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 Locaweb Serviços de Internet

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of Locaweb Serviços de Internet S.A.. Insiders own R$896m worth of shares in the R$3.3b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Locaweb Serviços de Internet. 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

With an ownership of 15%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.