In the wake of Arjo AB (publ)'s (STO:ARJO B) latest kr637m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in Arjo implies that they have significant influence over the company's share price
• A total of 9 investors have a majority stake in the company with 51% ownership
• Insiders have been buying lately

If you want to know who really controls Arjo AB (publ) (STO:ARJO B), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 40% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to kr8.9b last week after a 6.7% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 10% 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. Hence, if weakness in Arjo's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Arjo

What Does The Institutional Ownership Tell Us About Arjo?

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.

Arjo already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Arjo's historic earnings and revenue below, but keep in mind there's always more to the story.

Arjo is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Carl Bennet AB with 25% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.7% and 3.1%, of the shares outstanding, respectively.

We did some more digging and found that 9 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Arjo

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.

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 information suggests that Arjo AB (publ) insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It appears that the board holds about kr44m worth of stock. This compares to a market capitalization of kr8.9b. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Arjo. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 25%, of the Arjo 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Arjo better, we need to consider many other factors. Be aware that Arjo is showing 2 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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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.