Do Institutions Own Velocys plc (LON:VLS) Shares?

The big shareholder groups in Velocys plc (LON:VLS) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of UK£79m, Velocys is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about Velocys.

Check out our latest analysis for Velocys

What Does The Institutional Ownership Tell Us About Velocys?

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.

Velocys already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Velocys's earnings history, below. Of course, the future is what really matters.

It would appear that 18% of Velocys shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Lansdowne Partners Limited is currently the company's largest shareholder with 18% of shares outstanding. For context, the second largest shareholder holds about 8.3% of the shares outstanding, followed by an ownership of 7.8% by the third-largest shareholder.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Velocys

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 data suggests that insiders own under 1% of Velocys plc in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It seems the board members have no more than UK£285k worth of shares in the UK£79m company. I 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 36% ownership, the general public have some degree of sway over VLS. 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 an ownership of 14%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 5.3%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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 5 warning signs for Velocys (3 are concerning) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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