Painful week for private equity firms invested in Custom Truck One Source, Inc. (NYSE:CTOS) after 6.4% drop, institutions also suffered losses

By
Simply Wall St
Published
November 27, 2021
NYSE:CTOS
Source: Shutterstock

To get a sense of who is truly in control of Custom Truck One Source, Inc. (NYSE:CTOS), it is important to understand the ownership structure of the business. With 71% stake, private equity firms possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While the holdings of private equity firms took a hit after last week’s 6.4% price drop, institutions with their 14% holdings also suffered.

Let's delve deeper into each type of owner of Custom Truck One Source, beginning with the chart below.

Check out our latest analysis for Custom Truck One Source

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NYSE:CTOS Ownership Breakdown November 28th 2021

What Does The Institutional Ownership Tell Us About Custom Truck One Source?

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.

As you can see, institutional investors have a fair amount of stake in Custom Truck One Source. 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. 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 Custom Truck One Source's earnings history below. Of course, the future is what really matters.

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NYSE:CTOS Earnings and Revenue Growth November 28th 2021

Custom Truck One Source is not owned by hedge funds. The company's largest shareholder is Platinum Equity, LLC, with ownership of 60%. This implies that they have majority interest control of the future of the company. With 10% and 2.7% of the shares outstanding respectively, Energy Capital Partners, LLC and Mark Ein are the second and third largest shareholders. Mark Ein, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Furthermore, CEO Fredrick Ross is the owner of 0.8% of the company's shares.

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. 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 Custom Truck One Source

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 some shares in Custom Truck One Source, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$76m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. 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 71%, private equity firms could influence the Custom Truck One Source 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. For instance, we've identified 2 warning signs for Custom Truck One Source (1 is concerning) that 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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