NNIT A/S' (CPH:NNIT) stock price dropped 16% last week; private equity firms would not be happy

Key Insights

• The considerable ownership by private equity firms in NNIT indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 2 shareholders
• Institutions own 16% of NNIT

If you want to know who really controls NNIT A/S (CPH:NNIT), then you'll have to look at the makeup of its share registry. We can see that private equity firms own the lion's share in the company with 34% ownership. 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 as a group endured the highest losses last week after market cap fell by kr.512m.

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

Check out our latest analysis for NNIT

What Does The Institutional Ownership Tell Us About NNIT?

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 NNIT. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NNIT's earnings history below. Of course, the future is what really matters.

NNIT is not owned by hedge funds. The company's largest shareholder is Novo Holdings A/S, with ownership of 34%. Novo Nordisk A/S is the second largest shareholder owning 18% of common stock, and Chr. Augustinus Fabrikker Aktieselskab holds about 5.9% of the company stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of NNIT

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.

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 cannot confirm that board members are holding shares personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NNIT. 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 an ownership of 34%, 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.

Private Company Ownership

We can see that Private Companies own 5.9%, of the shares on issue. 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.

Public Company Ownership

It appears to us that public companies own 18% of NNIT. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NNIT better, we need to consider many other factors. Take risks for example - NNIT has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.

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.