Signify N.V.'s (AMS:LIGHT) latest 7.8% decline adds to one-year losses, institutional investors may consider drastic measures

By
Simply Wall St
Published
May 12, 2022
ENXTAM:LIGHT
Source: Shutterstock

To get a sense of who is truly in control of Signify N.V. (AMS:LIGHT), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 67% ownership. 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 saw their holdings value drop by 7.8% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 26% for shareholders. 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 downtrend continues, institutions may face pressures to sell Signify, which might have negative implications on individual investors.

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

Check out our latest analysis for Signify

ownership-breakdown
ENXTAM:LIGHT Ownership Breakdown May 12th 2022

What Does The Institutional Ownership Tell Us About Signify?

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.

We can see that Signify does have institutional investors; and they hold a good portion of the company's stock. 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 Signify's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ENXTAM:LIGHT Earnings and Revenue Growth May 12th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Signify is not owned by hedge funds. Amundi Asset Management is currently the largest shareholder, with 5.1% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 3.6% of common stock, and Deutsche Asset & Wealth Management holds about 3.2% of the company stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Signify

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. 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.

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 information suggests that Signify N.V. insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around €9.7m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 33% stake in Signify. 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. Be aware that Signify is showing 4 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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