Key Insights
- Significant control over Largo by private equity firms implies that the general public has more power to influence management and governance-related decisions
- A total of 2 investors have a majority stake in the company with 52% ownership
- 22% of Largo is held by Institutions
A look at the shareholders of Largo Inc. (TSE:LGO) can tell us which group is most powerful. The group holding the most number of shares in the company, around 44% 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.
As a result, private equity firms were the biggest beneficiaries of last week’s 10% gain.
Let’s delve deeper into each type of owner of Largo, beginning with the chart below.
Check out our latest analysis for Largo
What Does The Institutional Ownership Tell Us About Largo?
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.
Largo already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Largo’s historic earnings and revenue below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in Largo. Arias Resource Capital Management LP is currently the largest shareholder, with 44% of shares outstanding. With 8.7% and 8.3% of the shares outstanding respectively, West Family Investments, Inc. and Grantham Mayo Van Otterloo & Co. LLC are the second and third largest shareholders.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Largo
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Our most recent data indicates that insiders own less than 1% of Largo Inc.. It appears that the board holds about CA$562k worth of stock. This compares to a market capitalization of CA$168m. 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 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Largo. 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 44%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:
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.
I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
Valuation is complex, but we’re helping make it simple.
Find out whether Largo is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
