Private equity firms are Sembcorp Industries Ltd's (SGX:U96) biggest owners and were hit after market cap dropped S$321m

Key Insights

• Sembcorp Industries' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• 53% of the business is held by the top 2 shareholders
• Institutional ownership in Sembcorp Industries is 15%

To get a sense of who is truly in control of Sembcorp Industries Ltd (SGX:U96), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 50% to be precise, is private equity firms. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to S$8.0b last week, private equity firms would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Sembcorp Industries, beginning with the chart below.

See our latest analysis for Sembcorp Industries

What Does The Institutional Ownership Tell Us About Sembcorp Industries?

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 Sembcorp Industries does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Sembcorp Industries' earnings history below. Of course, the future is what really matters.

Sembcorp Industries is not owned by hedge funds. The company's largest shareholder is Temasek Holdings (Private) Limited, with ownership of 50%. With 3.3% and 1.9% of the shares outstanding respectively, Capital Research and Management Company and The Vanguard Group, Inc. are the second and third largest shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Sembcorp Industries

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.

We can see that insiders own shares in Sembcorp Industries Ltd. The insiders have a meaningful stake worth S$85m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if 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 Sembcorp Industries. 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 a stake of 50%, private equity firms could influence the Sembcorp Industries 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Sembcorp Industries you should be aware of, and 1 of them doesn't sit too well with us.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com