NFON AG's (ETR:NFN) 12% loss last week hit both individual investors who own 55% as well as institutions

Published
July 22, 2022
XTRA:NFN
Source: Shutterstock

To get a sense of who is truly in control of NFON AG (ETR:NFN), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 55% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 12% decrease in the stock price last week, private equity firms suffered the most losses, but institutions who own 25% stock also took a hit.

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

View our latest analysis for NFON

ownership-breakdown
XTRA:NFN Ownership Breakdown July 22nd 2022

What Does The Institutional Ownership Tell Us About NFON?

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.

We can see that NFON does have institutional investors; and they hold a good portion of the company's stock. 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 NFON, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
XTRA:NFN Earnings and Revenue Growth July 22nd 2022

It would appear that 5.1% of NFON shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is Milestone Venture Capital GmbH, with ownership of 32%. With 23% and 5.8% of the shares outstanding respectively, Active Ownership Capital S.à R.L. and Morgan Stanley, Investment Banking and Brokerage Investments are the second and third largest shareholders.

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.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 NFON

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. 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 note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in NFON. 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

With an ownership of 55%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NFON better, we need to consider many other factors. Take risks for example - NFON has 1 warning sign we think you should be aware of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether NFON is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis