Desktop S.A.'s (BVMF:DESK3) market cap dropped R$124m last week; Private equity firms bore the brunt

Key Insights

• The considerable ownership by private equity firms in Desktop indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 53% of the company
• 15% of Desktop is held by insiders

To get a sense of who is truly in control of Desktop S.A. (BVMF:DESK3), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 38% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 11% decline in share price, private equity firms suffered the most losses.

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

See our latest analysis for Desktop

What Does The Institutional Ownership Tell Us About Desktop?

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.

As you can see, institutional investors have a fair amount of stake in Desktop. 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. 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 Desktop, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Desktop. BRL Trust Investimentos Ltda. is currently the company's largest shareholder with 38% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder. Denio Lindo, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Desktop

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.

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 Desktop S.A.. Insiders own R$155m worth of shares in the R$1.1b 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 29% stake in Desktop. 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 Equity Ownership

With a stake of 38%, private equity firms could influence the Desktop board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it 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. To that end, you should be aware of the 1 warning sign we've spotted with Desktop .

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.