Smartpay Holdings Limited's (NZSE:SPY) recent 16% pullback adds to one-year year losses, institutional owners may take drastic measures

Simply Wall St · 10/15 18:02

Key Insights

  • Institutions' substantial holdings in Smartpay Holdings implies that they have significant influence over the company's share price
  • A total of 4 investors have a majority stake in the company with 52% ownership
  • 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 Smartpay Holdings Limited (NZSE:SPY), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 52% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 16% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 43% for shareholders. 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 downtrend continues, institutions may face pressures to sell Smartpay Holdings, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Smartpay Holdings.

View our latest analysis for Smartpay Holdings

ownership-breakdown
NZSE:SPY Ownership Breakdown October 15th 2024

What Does The Institutional Ownership Tell Us About Smartpay Holdings?

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 Smartpay Holdings does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Smartpay Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NZSE:SPY Earnings and Revenue Growth October 15th 2024

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Smartpay Holdings. Our data shows that Milford Asset Management, LTD is the largest shareholder with 15% of shares outstanding. Microequities Asset Management Pty Limited is the second largest shareholder owning 13% of common stock, and Wilson Asset Management (International) Pty Ltd. holds about 12% of the company stock. Additionally, the company's CEO Martyn Pomeroy directly holds 2.3% of the total shares outstanding.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 Smartpay Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can see that insiders own shares in Smartpay Holdings Limited. In their own names, insiders own NZ$17m worth of stock in the NZ$207m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Smartpay Holdings. 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 12%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Smartpay Holdings better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.