Institutional owners may consider drastic measures as Prosafe SE's (OB:PRS) recent kr353m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Prosafe implies that they have significant influence over the company's share price
• The top 4 shareholders own 59% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

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Every investor in Prosafe SE (OB:PRS) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 47% to be precise, is institutions. 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 endured the highest losses after the company's share price fell by 23% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 91% 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 downtrend continues, institutions may face pressures to sell Prosafe, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Prosafe.

View our latest analysis for Prosafe

What Does The Institutional Ownership Tell Us About Prosafe?

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.

Prosafe 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Prosafe, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 33% of Prosafe shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Davidson Kempner Capital Management LP with 18% of shares outstanding. In comparison, the second and third largest shareholders hold about 15% and 14% of the stock.

Our research also brought to light the fact that roughly 59% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Prosafe

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Prosafe SE in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It seems the board members have no more than kr4.0m worth of shares in the kr1.2b 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

The general public, who are usually individual investors, hold a 11% stake in Prosafe. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 6.3%, private equity firms could influence the Prosafe board. 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.

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 4 warning signs for Prosafe (2 are a bit unpleasant) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.