Institutional investors in Covestro AG (ETR:1COV) see €396m decrease in market cap last week, although long-term gains have benefitted them.
Key Insights
Institutions' substantial holdings in Covestro implies that they have significant influence over the company's share price
The top 25 shareholders own 49% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Covestro AG (ETR:1COV), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 57% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors endured the highest losses after the company's market cap fell by €396m last week. Still, the 36% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.
Let's take a closer look to see what the different types of shareholders can tell us about Covestro.
View our latest analysis for Covestro
What Does The Institutional Ownership Tell Us About Covestro?
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.
We can see that Covestro does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Covestro, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Covestro is not owned by hedge funds. The company's largest shareholder is Barclays Bank PLC, Securities Investments, with ownership of 5.1%. In comparison, the second and third largest shareholders hold about 5.0% and 3.8% of the stock.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Covestro
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 most recent data indicates that insiders own less than 1% of Covestro AG. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own €2.8m worth of shares. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 43% stake in Covestro. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
