While institutions invested in Otello Corporation ASA (OB:OTEC) benefited from last week's 11% gain, retail investors stood to gain the most

Key Insights

• The considerable ownership by retail investors in Otello indicates that they collectively have a greater say in management and business strategy
• The top 12 shareholders own 51% of the company
• Institutional ownership in Otello is 31%

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To get a sense of who is truly in control of Otello Corporation ASA (OB:OTEC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 42% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While retail investors were the group that benefitted the most from last week’s kr107m market cap gain, institutions too had a 31% share in those profits.

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

Check out our latest analysis for Otello

What Does The Institutional Ownership Tell Us About Otello?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Otello 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 Otello's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 11% of Otello. 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. Sand Grove Capital Management LLP is currently the company's largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 7.0% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Otello

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 most recent data indicates that insiders own some shares in Otello Corporation ASA. It has a market capitalization of just kr1.1b, and insiders have kr98m worth of shares, in their own names. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

With a 42% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Otello. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 3.5%, of the Otello stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 Otello is showing 2 warning signs in our investment analysis , you should know about...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.