How Much Of Darktrace plc (LON:DARK) Do Insiders Own?
Simply Wall St
4 min read
The big shareholder groups in Darktrace plc (LON:DARK) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
Darktrace is a pretty big company. It has a market capitalization of UK£4.9b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Darktrace.
What Does The Institutional Ownership Tell Us About Darktrace?
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.
Darktrace 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. 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 Darktrace's historic earnings and revenue below, but keep in mind there's always more to the story.
LSE:DARK Earnings and Revenue Growth July 31st 2021
We note that hedge funds don't have a meaningful investment in Darktrace. The company's largest shareholder is Summit Partners, L.P., with ownership of 22%. With 14% and 13% of the shares outstanding respectively, KKR & Co. Inc. and Angela Bacares are the second and third largest shareholders.
On looking further, we found that 57% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of 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. 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 Darktrace
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 information suggests that insiders maintain a significant holding in Darktrace plc. It has a market capitalization of just UK£4.9b, and insiders have UK£1.4b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, with a 20% stake in the company, will not easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Equity Ownership
With a stake of 36%, private equity firms could influence the Darktrace 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Darktrace better, we need to consider many other factors. Take risks for example - Darktrace has 3 warning signs (and 1 which is concerning) we think you should know about.
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.
This article by Simply Wall St is general in nature. 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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