Institutional owners may consider drastic measures as Elior Group SA's (EPA:ELIOR) recent €62m drop adds to long-term losses

By
Simply Wall St
Published
May 11, 2022
ENXTPA:ELIOR
Source: Shutterstock

Every investor in Elior Group SA (EPA:ELIOR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 57% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. The recent loss, which adds to a one-year loss of 65% 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. As a result, if the downtrend continues, institutions may face pressures to sell Elior Group, which might have negative implications on individual investors.

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

Check out our latest analysis for Elior Group

ownership-breakdown
ENXTPA:ELIOR Ownership Breakdown May 11th 2022

What Does The Institutional Ownership Tell Us About Elior Group?

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 Elior Group does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Elior Group's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ENXTPA:ELIOR Earnings and Revenue Growth May 11th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Elior Group. Looking at our data, we can see that the largest shareholder is Bagatelle Investissement et Management SAS, Asset Management Arm with 19% of shares outstanding. With 6.0% and 5.5% of the shares outstanding respectively, FMR LLC and Corporación Empresarial Emesa are the second and third largest shareholders.

We did some more digging and found that 9 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Elior Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Our information suggests that Elior Group SA insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It seems the board members have no more than €1.3m worth of shares in the €438m company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Elior Group. 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 Company Ownership

We can see that Private Companies own 5.5%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Elior Group 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.

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