Institutional owners may consider drastic measures as REN - Redes Energéticas Nacionais, SGPS, S.A.'s (ELI:RENE) recent €80m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in REN - Redes Energéticas Nacionais SGPS implies that they have significant influence over the company's share price
• A total of 4 investors have a majority stake in the company with 50% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of REN - Redes Energéticas Nacionais, SGPS, S.A. (ELI:RENE) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 29% ownership. 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 4.9% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 2.8% 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 REN - Redes Energéticas Nacionais SGPS, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of REN - Redes Energéticas Nacionais SGPS.

View our latest analysis for REN - Redes Energéticas Nacionais SGPS

What Does The Institutional Ownership Tell Us About REN - Redes Energéticas Nacionais SGPS?

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.

As you can see, institutional investors have a fair amount of stake in REN - Redes Energéticas Nacionais SGPS. 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. 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 REN - Redes Energéticas Nacionais SGPS' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in REN - Redes Energéticas Nacionais SGPS. State Grid Corporation of China is currently the largest shareholder, with 25% of shares outstanding. With 12% and 7.7% of the shares outstanding respectively, Pontegadea Inversiones, S.L and Lazard Asset Management LLC are the second and third largest shareholders.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of REN - Redes Energéticas Nacionais SGPS

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 most recent data indicates that insiders own less than 1% of REN - Redes Energéticas Nacionais, SGPS, S.A.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own €98k worth of shares. The absolute value might be more important than the proportional share. 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-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. 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.

Private Equity Ownership

With an ownership of 12%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 25%, of the REN - Redes Energéticas Nacionais SGPS stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

We can see that public companies hold 5.0% of the REN - Redes Energéticas Nacionais SGPS shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with REN - Redes Energéticas Nacionais SGPS (at least 2 which are significant) , and understanding them should be part of your investment process.

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.