Largo Inc.'s (TSE:LGO) largest shareholders are private equity firms who were rewarded as market cap surged CA$38m last week

Key Insights

• Significant control over Largo by private equity firms implies that the general public has more power to influence management and governance-related decisions
• A total of 2 investors have a majority stake in the company with 52% ownership
• Institutional ownership in Largo is 22%

A look at the shareholders of Largo Inc. (TSE:LGO) can tell us which group is most powerful. We can see that private equity firms own the lion's share in the company with 44% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private equity firms collectively scored the highest last week as the company hit CA$184m market cap following a 21% gain in the stock.

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

View our latest analysis for Largo

What Does The Institutional Ownership Tell Us About Largo?

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 Largo. 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 Largo, (below). Of course, keep in mind that there are other factors to consider, too.

Largo is not owned by hedge funds. Our data shows that Arias Resource Capital Management LP is the largest shareholder with 44% of shares outstanding. West Family Investments LLC is the second largest shareholder owning 8.7% of common stock, and Grantham Mayo Van Otterloo & Co. LLC holds about 8.2% of the company stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Largo

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. 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 data suggests that insiders own under 1% of Largo Inc. in their own names. It seems the board members have no more than CA$393k worth of shares in the CA$184m company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. 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 a stake of 44%, private equity firms could influence the Largo board. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Largo better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Largo you should know about.

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.

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

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.