Vertical Aerospace Ltd.'s (NYSE:EVTL) latest 20% decline adds to one-year losses, hedge funds investors may consider drastic measures

Key Insights

• Given the large stake in the stock by institutions, Vertical Aerospace's stock price might be vulnerable to their trading decisions
• The largest shareholder of the company is Mudrick Capital Management, L.P. with a 61% stake
• Insiders own 18% of Vertical Aerospace

To get a sense of who is truly in control of Vertical Aerospace Ltd. (NYSE:EVTL), it is important to understand the ownership structure of the business. We can see that hedge funds own the lion's share in the company with 61% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And hedge funds investors saw their holdings value drop by 20% last week. The recent loss, which adds to a one-year loss of 42% for stockholders, may not sit well with this group of investors. Hedge funds are often aggressively managed, usually with the goal of focusing on short-term profits. Because of their large stake in Vertical Aerospace, they hold a lot of power, and persistent under performance could lead to them influencing management decisions that might diverge from the company's long-term goals.

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

Check out our latest analysis for Vertical Aerospace

What Does The Institutional Ownership Tell Us About Vertical Aerospace?

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.

We can see that Vertical Aerospace 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Vertical Aerospace, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 61% of Vertical Aerospace. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Mudrick Capital Management, L.P. is currently the largest shareholder, with 61% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. Stephen Fitzpatrick, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Vertical Aerospace

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.

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.

It seems insiders own a significant proportion of Vertical Aerospace Ltd.. Insiders have a US$68m stake in this US$371m 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

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Vertical Aerospace. 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.

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. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Vertical Aerospace (of which 5 are potentially serious!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.