Institutional owners may take dramatic actions as Velesto Energy Berhad's (KLSE:VELESTO) recent 15% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Velesto Energy Berhad implies that they have significant influence over the company's share price
• Permodalan Nasional Berhad owns 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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If you want to know who really controls Velesto Energy Berhad (KLSE:VELESTO), then you'll have to look at the makeup of its share registry. With 70% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 15% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 49% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Velesto Energy Berhad which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Velesto Energy Berhad.

See our latest analysis for Velesto Energy Berhad

What Does The Institutional Ownership Tell Us About Velesto Energy Berhad?

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.

Velesto Energy Berhad already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Velesto Energy Berhad'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. Velesto Energy Berhad is not owned by hedge funds. Permodalan Nasional Berhad is currently the company's largest shareholder with 51% of shares outstanding. This implies that they have majority interest control of the future of the company. With 3.5% and 2.4% of the shares outstanding respectively, Urusharta Jamaah Sdn Bhd and Fidelity International Ltd are the second and third largest shareholders.

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 Velesto Energy Berhad

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 data suggests that insiders own under 1% of Velesto Energy Berhad in their own names. It seems the board members have no more than RM5.6m worth of shares in the RM1.2b 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 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Velesto Energy Berhad. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Velesto Energy Berhad better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Velesto Energy Berhad you should be aware of, and 1 of them is a bit concerning.

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.