While institutions invested in Limestone Bancorp, Inc. (NASDAQ:LMST) benefited from last week's 10% gain, private equity firms stood to gain the most

By
Simply Wall St
Published
March 21, 2022
NasdaqCM:LMST
Source: Shutterstock

If you want to know who really controls Limestone Bancorp, Inc. (NASDAQ:LMST), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 23% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

Private equity firms gained the most after market cap touched US$161m last week, while institutions who own 23% also benefitted.

Let's take a closer look to see what the different types of shareholders can tell us about Limestone Bancorp.

Check out our latest analysis for Limestone Bancorp

ownership-breakdown
NasdaqCM:LMST Ownership Breakdown March 21st 2022

What Does The Institutional Ownership Tell Us About Limestone Bancorp?

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.

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

earnings-and-revenue-growth
NasdaqCM:LMST Earnings and Revenue Growth March 21st 2022

It looks like hedge funds own 5.0% of Limestone Bancorp 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. The company's largest shareholder is Patriot Financial Partners, L.P., with ownership of 18%. In comparison, the second and third largest shareholders hold about 6.5% and 6.1% of the stock. Additionally, the company's CEO John Taylor directly holds 2.0% of the total shares outstanding.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Limestone Bancorp

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.

It seems insiders own a significant proportion of Limestone Bancorp, Inc.. Insiders have a US$37m stake in this US$161m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Limestone Bancorp. 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 Equity Ownership

With a stake of 23%, private equity firms could influence the Limestone Bancorp board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 4.2%, of the Limestone Bancorp 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:

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. Case in point: We've spotted 1 warning sign for Limestone Bancorp 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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