In the wake of Synthomer plc's (LON:SYNT) latest UK£40m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Synthomer's stock price is sensitive to their trading actions
• 52% of the business is held by the top 5 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Synthomer plc (LON:SYNT), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to UK£433m last week after a 8.5% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 58% 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. As a result, if the downtrend continues, institutions may face pressures to sell Synthomer, which might have negative implications on individual investors.

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

View our latest analysis for Synthomer

What Does The Institutional Ownership Tell Us About Synthomer?

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.

Synthomer 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 Synthomer'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. Synthomer is not owned by hedge funds. Kuala Lumpur Kepong Berhad is currently the largest shareholder, with 27% of shares outstanding. UBS Asset Management AG is the second largest shareholder owning 10% of common stock, and Jupiter Fund Management Plc holds about 7.8% of the company stock.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Synthomer

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.

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 Synthomer plc insiders own under 1% of the company. It has a market capitalization of just UK£433m, and the board has only UK£2.5m worth of shares in their own names. 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

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Synthomer. 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.

Public Company Ownership

Public companies currently own 27% of Synthomer stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Synthomer (including 2 which are potentially serious) .

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.

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