Coveo Solutions Inc.'s (TSE:CVO) market cap dropped CA$90m last week; Retail investors bore the brunt

Key Insights

• The considerable ownership by retail investors in Coveo Solutions indicates that they collectively have a greater say in management and business strategy
• 52% of the business is held by the top 4 shareholders
• Institutional ownership in Coveo Solutions is 13%

To get a sense of who is truly in control of Coveo Solutions Inc. (TSE:CVO), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 29% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, retail investors endured the biggest losses as the stock fell by 10%.

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

View our latest analysis for Coveo Solutions

What Does The Institutional Ownership Tell Us About Coveo Solutions?

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.

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

It would appear that 22% of Coveo Solutions shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Elliott Management Corporation is currently the company's largest shareholder with 22% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 11% of the stock. Furthermore, CEO Louis Tetu is the owner of 3.3% of the company's shares.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 Coveo Solutions

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in Coveo Solutions Inc.. As individuals, the insiders collectively own CA$30m worth of the CA$812m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Coveo Solutions. 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 23%, 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.

Private Company Ownership

We can see that Private Companies own 8.9%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Coveo Solutions has 2 warning signs we think you should be aware of.

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.