In the wake of Serica Energy plc's (LON:SQZ) latest UK£46m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, Serica Energy's stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 11 shareholders
• Insiders have been buying lately

If you want to know who really controls Serica Energy plc (LON:SQZ), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 53% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 8.2% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 32% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Serica Energy's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of Serica Energy, beginning with the chart below.

See our latest analysis for Serica Energy

What Does The Institutional Ownership Tell Us About Serica Energy?

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 Serica Energy. 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 Serica Energy'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. Hedge funds don't have many shares in Serica Energy. Mercuria Holdings (Uk) Ltd is currently the company's largest shareholder with 25% of shares outstanding. The second and third largest shareholders are Peel Hunt LLP., Asset Management Arm and BlackRock, Inc., with an equal amount of shares to their name at 4.4%.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Serica Energy

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 most recent data indicates that insiders own less than 1% of Serica Energy plc. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It seems the board members have no more than UK£1.0m worth of shares in the UK£514m company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 20% 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 Company Ownership

We can see that Private Companies own 26%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Serica Energy is showing 2 warning signs in our investment analysis , 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.