Velo3D, Inc.'s (NYSE:VLD) market cap touched US$272m last week, benefiting both private equity firms who own 48% as well as institutions
editorial-team@simplywallst.com (Simply Wall St)
4 min read
Key Insights
Significant control over Velo3D by private equity firms implies that the general public has more power to influence management and governance-related decisions
Every investor in Velo3D, Inc. (NYSE:VLD) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 48% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
While private equity firms were the group that benefitted the most from last week’s US$32m market cap gain, institutions too had a 26% share in those profits.
In the chart below, we zoom in on the different ownership groups of Velo3D.
What Does The Institutional Ownership Tell Us About Velo3D?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Velo3D 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 Velo3D, (below). Of course, keep in mind that there are other factors to consider, too.
NYSE:VLD Earnings and Revenue Growth November 15th 2023
We note that hedge funds don't have a meaningful investment in Velo3D. Looking at our data, we can see that the largest shareholder is Deer Management Company, LLC with 19% of shares outstanding. Khosla Ventures, LLC is the second largest shareholder owning 15% of common stock, and Playground Global, LLC holds about 14% of the company stock. In addition, we found that Benny Buller, the CEO has 2.5% of the shares allocated to their name.
To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
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 Velo3D
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.
We can report that insiders do own shares in Velo3D, Inc.. It has a market capitalization of just US$272m, and insiders have US$9.3m worth of shares, in their own names. 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 24% stake in Velo3D. 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 an ownership of 48%, 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 Velo3D better, we need to consider many other factors. Take risks for example - Velo3D has 4 warning signs we think you should be aware of.
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.
