Stock Analysis

In the wake of Paysafe Limited's (NYSE:PSFE) latest US$79m market cap drop, institutional owners may be forced to take severe actions

NYSE:PSFE
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Key Insights

  • Institutions' substantial holdings in Paysafe implies that they have significant influence over the company's share price
  • 50% of the business is held by the top 4 shareholders
  • Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Paysafe Limited (NYSE:PSFE), 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 29% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 12% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 45% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Paysafe which might hurt individual investors.

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

Check out our latest analysis for Paysafe

ownership-breakdown
NYSE:PSFE Ownership Breakdown October 27th 2023

What Does The Institutional Ownership Tell Us About Paysafe?

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

earnings-and-revenue-growth
NYSE:PSFE Earnings and Revenue Growth October 27th 2023

Hedge funds don't have many shares in Paysafe. PI Holdings Jersey Limited is currently the company's largest shareholder with 21% of shares outstanding. With 18% and 6.1% of the shares outstanding respectively, Blackstone Inc. and Fidelity National Financial Inc., Asset Management Arm are the second and third largest shareholders.

On looking further, we found that 50% 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 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Paysafe

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 Paysafe Limited. As individuals, the insiders collectively own US$18m worth of the US$600m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Paysafe. 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 23%, private equity firms could influence the Paysafe 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 21%, of the Paysafe 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Paysafe , and understanding them should be part of your investment process.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Paysafe is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.