Diversified Energy Company PLC's (LON:DEC) recent 9.3% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Significantly high institutional ownership implies Diversified Energy's stock price is sensitive to their trading actions
• 50% of the business is held by the top 14 shareholders
• Insiders have been buying lately

If you want to know who really controls Diversified Energy Company PLC (LON:DEC), 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 85% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to UK£632m last week after a 9.3% drop in the share price. The recent loss, which adds to a one-year loss of 39% for stockholders, may not sit well with this group of investors. 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. As a result, if the decline continues, institutional investors may be pressured to sell Diversified Energy which might hurt individual investors.

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

View our latest analysis for Diversified Energy

What Does The Institutional Ownership Tell Us About Diversified 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.

We can see that Diversified Energy 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. 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 Diversified Energy's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Diversified Energy is not owned by hedge funds. Our data shows that M&G Investment Management Limited is the largest shareholder with 6.3% of shares outstanding. For context, the second largest shareholder holds about 5.1% of the shares outstanding, followed by an ownership of 5.0% by the third-largest shareholder. In addition, we found that Robert Hutson, the CEO has 2.5% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 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 Diversified Energy

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.

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 most recent data indicates that insiders own some shares in Diversified Energy Company PLC. As individuals, the insiders collectively own UK£22m worth of the UK£632m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Diversified Energy. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 5 warning signs for Diversified Energy you should be aware of, and 2 of them make us uncomfortable.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.