With 42% ownership, Arco Platform Limited (NASDAQ:ARCE) insiders have a lot at stake
Key Insights
Arco Platform's significant insider ownership suggests inherent interests in company's expansion
The top 4 shareholders own 55% of the company
To get a sense of who is truly in control of Arco Platform Limited (NASDAQ:ARCE), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 42% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
So, insiders of Arco Platform have a lot at stake and every decision they make on the company’s future is important to them from a financial point of view.
Let's delve deeper into each type of owner of Arco Platform, beginning with the chart below.
Check out our latest analysis for Arco Platform
What Does The Institutional Ownership Tell Us About Arco Platform?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Arco Platform 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 Arco Platform's historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 18% of Arco Platform shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Oto de Sa Cavalcante is the largest shareholder with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 7.1%, of the shares outstanding, respectively. Ari de Sa Cavalcante Neto, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Arco Platform
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that insiders maintain a significant holding in Arco Platform Limited. Insiders have a US$389m stake in this US$930m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 10% stake in Arco Platform. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
Private equity firms hold a 6.2% stake in Arco Platform. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Arco Platform better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Arco Platform you should be aware of.
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.
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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.
