In the wake of Limoneira Company's (NASDAQ:LMNR) latest US$35m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in Limoneira implies that they have significant influence over the company's share price
• The top 11 shareholders own 51% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of Limoneira Company (NASDAQ:LMNR), it is important to understand the ownership structure of the business. With 58% stake, institutions 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.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$300m last week after a 11% drop in the share price. The recent loss, which adds to a one-year loss of 18% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Limoneira which might hurt individual investors.

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

Check out our latest analysis for Limoneira

What Does The Institutional Ownership Tell Us About Limoneira?

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 Limoneira does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Limoneira's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Limoneira is not owned by hedge funds. Our data shows that Global Alpha Capital Management Ltd. is the largest shareholder with 18% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 6.5% of common stock, and Peter Nolan holds about 6.1% of the company stock. Peter Nolan, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO Harold Edwards directly holds 1.3% of the total shares outstanding.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Limoneira

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. 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.

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 Limoneira Company. In their own names, insiders own US$27m worth of stock in the US$300m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 33% stake in Limoneira. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Limoneira 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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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.