In the wake of Kemira Oyj's (HEL:KEMIRA) latest €119m market cap drop, institutional owners may be forced to take severe actions

By
Simply Wall St
Published
May 12, 2022
HLSE:KEMIRA
Source: Shutterstock

Every investor in Kemira Oyj (HEL:KEMIRA) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 40% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by €119m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 8.2% for shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Kemira Oyj, which might have negative implications on individual investors.

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

See our latest analysis for Kemira Oyj

ownership-breakdown
HLSE:KEMIRA Ownership Breakdown May 12th 2022

What Does The Institutional Ownership Tell Us About Kemira Oyj?

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 Kemira Oyj. 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 Kemira Oyj's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
HLSE:KEMIRA Earnings and Revenue Growth May 12th 2022

We note that hedge funds don't have a meaningful investment in Kemira Oyj. Our data shows that Oras Invest Oy is the largest shareholder with 21% of shares outstanding. For context, the second largest shareholder holds about 10% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Kemira Oyj

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Kemira Oyj. The insiders have a meaningful stake worth €35m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 26% 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.

Private Equity Ownership

With a stake of 10%, private equity firms could influence the Kemira Oyj board. 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

Our data indicates that Private Companies hold 22%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Kemira Oyj better, we need to consider many other factors. For instance, we've identified 3 warning signs for Kemira Oyj that 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.

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