In the wake of ChemoMetec A/S' (CPH:CHEMM) latest kr.400m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies ChemoMetec's stock price is sensitive to their trading actions
• A total of 12 investors have a majority stake in the company with 51% ownership
• Insiders have bought recently

To get a sense of who is truly in control of ChemoMetec A/S (CPH:CHEMM), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to kr.6.0b last week after a 6.3% drop in the share price. The recent loss, which adds to a one-year loss of 30% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in ChemoMetec's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for ChemoMetec

What Does The Institutional Ownership Tell Us About ChemoMetec?

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in ChemoMetec. BlackRock, Inc. is currently the company's largest shareholder with 14% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 5.0% of the stock.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of ChemoMetec

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 ChemoMetec A/S in their own names. It has a market capitalization of just kr.6.0b, and the board has only kr.18m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 44% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand ChemoMetec better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for ChemoMetec you should know about.

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.