Private equity firms invested in Libstar Holdings Limited (JSE:LBR) copped the brunt of last week's R268m market cap decline

Key Insights

• Libstar Holdings' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 2 investors have a majority stake in the company with 56% ownership
• Institutions own 13% of Libstar Holdings

To get a sense of who is truly in control of Libstar Holdings Limited (JSE:LBR), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 42% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by R268m.

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

See our latest analysis for Libstar Holdings

What Does The Institutional Ownership Tell Us About Libstar Holdings?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Libstar Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Libstar Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Libstar Holdings. The Abraaj Group is currently the largest shareholder, with 42% of shares outstanding. Public Investment Corporation Limited is the second largest shareholder owning 14% of common stock, and BBusiness Venture Investments No 2071 (RF) Proprietary Limited holds about 12% of the company stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 56% stake.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Libstar Holdings

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of Libstar Holdings Limited in their own names. It seems the board members have no more than R570k worth of shares in the R2.1b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Libstar Holdings. 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

With an ownership of 42%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Libstar Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for Libstar Holdings that 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.