Could The De La Rue plc (LON:DLAR) Ownership Structure Tell Us Something Useful?

July 29, 2020
  •  Updated
October 05, 2022
LSE:DLAR
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A look at the shareholders of De La Rue plc (LON:DLAR) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of UK£254m, De La Rue is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about De La Rue.

Check out our latest analysis for De La Rue

ownership-breakdown
LSE:DLAR Ownership Breakdown July 30th 2020

What Does The Institutional Ownership Tell Us About De La Rue?

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

earnings-and-revenue-growth
LSE:DLAR Earnings and Revenue Growth July 30th 2020

It looks like hedge funds own 7.2% of De La Rue shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Brandes Investment Partners, L.P. is currently the largest shareholder, with 10.0% of shares outstanding. For context, the second largest shareholder holds about 7.2% of the shares outstanding, followed by an ownership of 6.5% by the third-largest shareholder.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of De La Rue

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.

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 data suggests that insiders own under 1% of De La Rue plc in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It has a market capitalization of just UK£254m, and the board has only UK£1.7m worth of shares in their own names. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 51% of De La Rue shares. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 3.1%, 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:

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. For instance, we've identified 4 warning signs for De La Rue (3 shouldn't be ignored) that you should be aware of.

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.

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