Every investor in TruFin plc (LON:TRU) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 70% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's take a closer look to see what the different types of shareholders can tell us about TruFin.
What Does The Institutional Ownership Tell Us About TruFin?
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.
As you can see, institutional investors have a fair amount of stake in TruFin. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 TruFin's historic earnings and revenue below, but keep in mind there's always more to the story.
AIM:TRU Earnings and Revenue Growth May 14th 2024
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 TruFin. Our data shows that Watrium AS is the largest shareholder with 23% of shares outstanding. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 11% by the third-largest shareholder.
After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of TruFin
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of TruFin plc in their own names. It seems the board members have no more than UK£181k worth of shares in the UK£81m company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TruFin. 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
Private equity firms hold a 18% stake in TruFin. This suggests they can be influential in key policy decisions. 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. For example, we've discovered 2 warning signs for TruFin that you should be aware of before investing here.
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.
