In the wake of Liberty Latin America Ltd.'s (NASDAQ:LILA) latest US$134m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Liberty Latin America's stock price is sensitive to their trading actions
• The top 14 shareholders own 50% of the company
• Insider ownership in Liberty Latin America is 11%

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To get a sense of who is truly in control of Liberty Latin America Ltd. (NASDAQ:LILA), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 63% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$134m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 21% for 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 downtrend continues, institutions may face pressures to sell Liberty Latin America, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Liberty Latin America.

Check out our latest analysis for Liberty Latin America

What Does The Institutional Ownership Tell Us About Liberty Latin America?

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.

Liberty Latin America already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Liberty Latin America's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Liberty Latin America. BlackRock, Inc. is currently the largest shareholder, with 7.1% of shares outstanding. The second and third largest shareholders are Searchlight Capital Partners, L.P. and FMR LLC, with an equal amount of shares to their name at 6.2%. Additionally, the company's CEO Balan Nair directly holds 1.6% of the total shares outstanding.

After doing some more digging, we found that the top 14 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Liberty Latin America

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 a reasonable proportion of Liberty Latin America Ltd.. It is very interesting to see that insiders have a meaningful US$173m stake in this US$1.5b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 6.2% stake in Liberty Latin America. This suggests they can be influential in key policy decisions. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.