Institutional investors may adopt severe steps after DWF Group plc's (LON:DWF) latest 11% drop adds to a year losses
Simply Wall St
5 min read
Key Insights
Given the large stake in the stock by institutions, DWF Group's stock price might be vulnerable to their trading decisions
A total of 20 investors have a majority stake in the company with 50% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
To get a sense of who is truly in control of DWF Group plc (LON:DWF), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 42% ownership. 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 UK£21m. The recent loss, which adds to a one-year loss of 49% for stockholders, may not sit well with this group of investors. 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 DWF Group, 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 DWF Group.
What Does The Institutional Ownership Tell Us About DWF Group?
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.
DWF Group 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of DWF Group, (below). Of course, keep in mind that there are other factors to consider, too.
LSE:DWF Earnings and Revenue Growth June 9th 2023
DWF Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Dwf Group Plc., Employee Stock Ownership Plan with 8.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 5.6% of the stock. Furthermore, CEO Nigel Knowles is the owner of 0.8% of the company's shares.
After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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 DWF Group
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.
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 report that insiders do own shares in DWF Group plc. It has a market capitalization of just UK£165m, and insiders have UK£5.3m worth of shares, in their own names. 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-- including retail investors -- own 38% stake in the company, and hence can't easily be ignored. 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 5.6%, private equity firms could influence the DWF Group 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.
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 4 warning signs with DWF Group , and understanding them should be part of your investment process.
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.
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