While institutions invested in Velo3D, Inc. (NYSE:VLD) benefited from last week's 13% gain, private equity firms stood to gain the most

Key Insights

• Significant control over Velo3D by private equity firms implies that the general public has more power to influence management and governance-related decisions
• A total of 4 investors have a majority stake in the company with 54% ownership
• 26% of Velo3D is held by Institutions

To get a sense of who is truly in control of Velo3D, Inc. (NYSE:VLD), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 48% 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.

Following a 13% increase in the stock price last week, private equity firms profited the most, but institutions who own 26% stock also stood to gain from the increase.

In the chart below, we zoom in on the different ownership groups of Velo3D.

Check out our latest analysis for Velo3D

What Does The Institutional Ownership Tell Us About Velo3D?

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 Velo3D 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 Velo3D's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Velo3D. Our data shows that Deer Management Company, LLC is the largest shareholder with 19% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 14% by the third-largest shareholder. Additionally, the company's CEO Benny Buller directly holds 2.5% of the total shares outstanding.

On looking further, we found that 54% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 Velo3D

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Shareholders would probably be interested to learn that insiders own shares in Velo3D, Inc.. It has a market capitalization of just US$272m, and insiders have US$9.3m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 24% stake in Velo3D. 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 an ownership of 48%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Velo3D better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Velo3D 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.