Private equity firms are Coveo Solutions Inc.'s (TSE:CVO) biggest owners and were rewarded after market cap rose by CA$67m last week

Key Insights

• Coveo Solutions' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 4 shareholders own 53% of the company
• Recent purchases by insiders

A look at the shareholders of Coveo Solutions Inc. (TSE:CVO) can tell us which group is most powerful. The group holding the most number of shares in the company, around 27% to be precise, is private equity firms. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private equity firms collectively scored the highest last week as the company hit CA$506m market cap following a 13% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Coveo Solutions.

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

It looks like hedge funds own 19% of Coveo Solutions shares. 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 19% of shares outstanding. Fonds de solidarité FTQ is the second largest shareholder owning 14% of common stock, and Investissement Québec, Investment Arm holds about 13% of the company stock. Additionally, the company's CEO Louis Tetu directly holds 3.8% of the total shares outstanding.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

We can report that insiders do own shares in Coveo Solutions Inc.. In their own names, insiders own CA$22m worth of stock in the CA$506m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Coveo Solutions. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 27% stake in Coveo Solutions. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 10%, of the company's shares. 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 Coveo Solutions better, we need to consider many other factors. Take risks for example - Coveo Solutions has 1 warning sign we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.