Institutional owners may take dramatic actions as Naked Wines plc's (LON:WINE) recent 12% drop adds to one-year losses

Key Insights

• Significantly high institutional ownership implies Naked Wines' stock prices are sensitive to their trading actions.
• The top 8 shareholders own 51% of the company
• Insiders have been buying lately

To get a sense of who is truly in control of Naked Wines plc (LON:WINE), it is important to understand the ownership structure of the business. With 65% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by UK£12m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 79% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Naked Wines' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Naked Wines

What Does The Institutional Ownership Tell Us About Naked Wines?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Naked Wines already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Naked Wines, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Our data indicates that hedge funds own 19% of Naked Wines. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Punch Card Management LP with 10.0% of shares outstanding. For context, the second largest shareholder holds about 9.5% of the shares outstanding, followed by an ownership of 9.4% by the third-largest shareholder.

We did some more digging and found that 8 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Naked Wines

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Naked Wines plc insiders own under 1% of the company. It seems the board members have no more than UK£691k worth of shares in the UK£91m 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 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Naked Wines. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Naked Wines better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Naked Wines .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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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.