The considerable ownership by private equity firms in Emeco Holdings indicates that they collectively have a greater say in management and business strategy
53% of the business is held by the top 3 shareholders
Every investor in Emeco Holdings Limited (ASX:EHL) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 39% 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.
Meanwhile, individual investors make up 30% of the company’s shareholders.
Let's take a closer look to see what the different types of shareholders can tell us about Emeco Holdings.
What Does The Institutional Ownership Tell Us About Emeco 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.
As you can see, institutional investors have a fair amount of stake in Emeco Holdings. 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. 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 Emeco Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
ASX:EHL Earnings and Revenue Growth October 7th 2024
Hedge funds don't have many shares in Emeco Holdings. Black Diamond Capital Management, L.L.C. is currently the company's largest shareholder with 39% of shares outstanding. In comparison, the second and third largest shareholders hold about 10% and 3.6% of the stock. Furthermore, CEO Ian Testrow is the owner of 3.0% of the company's shares.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence 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 Emeco Holdings
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
We can see that insiders own shares in Emeco Holdings Limited. As individuals, the insiders collectively own AU$18m worth of the AU$393m company. 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 30% stake in Emeco Holdings. 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 a stake of 39%, private equity firms could influence the Emeco Holdings board. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
