Key Insights
-
Institutions' substantial holdings in Sappi implies that they have significant influence over the company's share price
-
53% of the business is held by the top 3 shareholders
If you want to know who really controls Sappi Limited ( JSE:SAP ), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 86% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to R14b last week after a 9.2% drop in the share price. The recent loss, which adds to a one-year loss of 50% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Sappi which might hurt individual investors.
Let's delve deeper into each type of owner of Sappi, beginning with the chart below.
See our latest analysis for Sappi
What Does The Institutional Ownership Tell Us About Sappi?
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.
Sappi 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 Sappi, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Sappi. The company's largest shareholder is Public Investment Corporation Limited, with ownership of 21%. For context, the second largest shareholder holds about 21% of the shares outstanding, followed by an ownership of 11% by the third-largest shareholder.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Sappi
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 information suggests that Sappi Limited insiders own under 1% of the company. It has a market capitalization of just R14b, and the board has only R57m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 13% stake in Sappi. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
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. For example, we've discovered 2 warning signs for Sappi (1 is significant!) that you should be aware of before investing here.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts .
Have feedback on this article? Concerned about the content? Get in touch
with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
